Commerzbank’s FX & Commodity Analyst Volkmar Baur reports that Chinese Aluminium production has risen nearly 3% year-on-year and is running above the government’s annualized cap, supported by higher Aluminium prices and redirected Alumina flows as the Strait of Hormuz remains blocked. The bank warns that if Beijing does not raise the cap, smelters will eventually need to scale back output later in the year.
High prices and alumina surplus drive output
“It is expected that Chinese production figures will remain above the 3.75 million-ton threshold in the coming months as well. As long as the Iran conflict persists and renders the Strait of Hormuz impassable, production disruptions in the Gulf region are likely to continue.”
“This has led to a 9% increase in the price of aluminium since the conflict began.”
“In addition, the closure of the Strait of Hormuz is leading to a global oversupply of alumina. Alumina (or aluminium oxide) is primarily used for aluminium production and is imported into the Gulf region as a feedstock for aluminium production.”
“Both rising aluminium prices and a surplus of alumina therefore make it economically lucrative (at least for the moment) for Chinese smelters to produce above the government’s cap. If this cap is not raised, production would have to be scaled back accordingly over the course of the year.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
