BEIJING (Reuters) - China’s aluminum production rose by 2.4% year-on-year in the first two months of 2020, official data showed on Monday, as smelting capacity commissioned late last year took supply higher despite a big hit to demand from the coronavirus outbreak.
The world’s top aluminum producing country churned out 5.85 million tonnes of the metal in January and February combined, the National Bureau of Statistics said. The year-earlier, two-month period had one less day due to 2020 being a leap year.
The bureau does not typically break out figures for January and February separately due to the week-long Lunar New Year holiday, which this year fell in late January and was extended in an attempt to stop the spread of the virus.
Output averaged 97,500 tonnes a day over January and February combined, according to Reuters calculations. That was down from around 98,000 tonnes a day in December, the third-highest daily rate on record.
“The point is that metal has continued to come out at about the same rate and probably even rose a little in February ... but demand has collapsed,” said Paul Adkins, managing director of consultancy AZ China.
Adkins also noted the first 150,000 ton phase of Yunnan Shenhuo’s smelter had started up at end-2019 and now ramped up. There will be further capacity commissioned this month, he added.
Factories that process primary aluminum into products were slow to restart after the extended holiday as virus-related travel curbs left them short of workers. Since smelters cannot shut down and restart in a matter of weeks, they have largely maintained operating rates, despite weak downstream demand.
This has seen Shanghai Futures Exchange aluminum inventories AL-STX-SGH more than double this year to more than 500,000 tonnes, while Adkins estimates there is another 300,000 tonnes sitting at smelters, undelivered to markets.
Meanwhile, Shanghai aluminum prices SAFcv1 are at around 12,750 yuan ($1,823.04) a ton, near their lowest since July 2016, leaving smelters struggling to break even.
“We calculate the average cost of production in the range of 13,100-13,200 yuan a ton, so there’s almost a 500 yuan deficit,” said Adkins, who said the big question now is whether smelters decide to shut down production.
China’s output of 10 nonferrous metals - including copper, aluminum, lead, zinc and nickel – rose 2.2% year-on-year to 9.35 million tonnes in January and February combined.
The other non-ferrous metals in this group are tin, antimony, mercury, magnesium and titanium.
Reporting by Tom Daly; Editing by Tom Hogue and Kenneth Maxwell