Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Following a significant rise in electricity, alumina, and carbon anodes, China’s primary aluminum input cost surged to CNY14,345/mt($2,219.23/mt) in July, up by CNY303/mt from June, according to local media reports based on research by Antaike.

The cost of carbon anodes, alumina, and electricity contributed to 0.76, 0.68, and 0.66pc of the total input cost escalation last month. In July, aluminum prices remained firm.

The average price of primary aluminum in July was CNY19,227/mt ($2,974.34/mt), up by 3.1pc the month prior. The average profit for aluminum producers was CNY4,882/mt, up by CNY278/mt from the prior month. The profitability in some low-cost enterprises was as high as CNY7,000/mt.

The fluctuations in the prices of alumina, anode contribute largely to the input cost escalation. In July, the significant cost contributors were electricity -35.3pc, alumina – 33.7pc, carbon anode – 14.3pc, and alumina fluoride – 1.1pc.

Power Crisis in China

July -August is the peak for China’s industrial and electricity consumption. This year too, power consumption in several areas of China reached a new high, pressuring the coal supply for primary aluminum producing companies. In July, the average price of Qinhuangdao thermal coal (Q5500) reached CNY942/mt, a record high, an increase of CNY308/mt from the average price in March this year. 

Alleviating supply constraints on coal, National Development and Reform Commission has put more than 5mn mt of coal reserves into the market four times a year and announced a plan to release 10mn mt of more coal. To overcome the shortage of coal, Henan and Guizhou are restricting coal export to cater to domestic demand. 

Similarly, some aluminum companies with their power plants are urging to switch to grid power for production. But primary aluminum producers using electricity from their plants have to face input cost escalation of CNY4.7/mt from CNY1/mt if they use coal.

Areas like Qinghai, Shanxi, Sichuan, Inner Mongolia have changed network power policies by canceling preferential power prices or rising power prices. Currently, Guangxi, Guizhou, and other regions are implementing the new electricity prices.

The national weighted average comprehensive electricity price (including tax) in July was CNY0.37/kWh. The plants using the power from their power plants paid CNY0.39 /kWh, while those using the grid electricity were charged CNY0.35/kWh.

Antaike predicts that the prices of these three major cost components will continue to rise in August and pressure input cost escalation for electrolytic aluminum manufacturers.

($1= CNY6.46)

Leave a Reply

Your email address will not be published.