BEIJING (Reuters) - China’s primary aluminium output defied low prices to rise for a second straight month to a record high in December as falling alumina costs boosted margins, while 2018 annual output was also a record, official data showed on Monday.
The world’s top producer churned out more than 3 million tonnes in a month for the first time, undeterred by aluminium prices at two-year lows, the impact of the U.S.-China trade war and Beijing’s environmental crackdown.
Production was likely spurred by new smelter openings late last year and higher utilisation rates following a plunge in the cost of raw material alumina, said Helen Lau, an analyst at Argonaut Securities.
Output hit 3.05 million tonnes in December, National Bureau of Statistics data showed, up 8.2 percent from November and up 11.3 percent from December 2017.
On a daily basis, China produced almost 98,400 tonnes of aluminium last month, up from 94,000 tonnes in November and also a record high, according to Reuters calculations. December had one more day than November.
Full-year output came in at 35.8 million tonnes in 2018, up 7.4 percent from the previous annual record in 2017.
China added 3.8 million tonnes of aluminium smelting capacity in 2018, according to consultancy AZ China, while about 2.8 million tonnes was shut due to a slump in aluminium prices.
Winter restrictions on output to curb pollution were also less severe than expected.
Shanghai aluminium prices slumped a hefty 14 percent over 2018 to below 14,000 yuan ($2,063) a tonne amid plentiful supply and worries over the impact of the Sino-U.S. trade war on demand.
“Even though at the current (aluminium) price you may say smelters are not making money, as long as they break even they will continue to produce,” said Lau, who expects another 5 percent increase in China’s output in 2019.
“Those newly commissioned smelters have to start operating to pay back their loans. They have to generate enough cash flow to do that.”
Alumina prices, which soared from March last year on an outage at Norsk Hydro’s Alunorte plant, fell almost 30 percent in the fourth quarter, easing the pressure on smelters.
Meanwhile, output of 10 nonferrous metals - including copper, aluminium, lead, zinc and nickel - came in at a record 5.08 million tonnes in December, up 7.8 percent from November and up 10 percent year-on-year.
Full-year output was up 6 percent at 56.88 million tonnes, also a record high. The other metals in the group are tin, antimony, mercury, magnesium and titanium.
($1 = 6.7871 Chinese yuan renminbi)
Reporting by Tom Daly; editing by Richard Pullin