Aluminum Industry Faces Bright Prospects under the Policy Guide

In 2010, the total national output of aluminum oxide was 28.9551 million tons (quick statistics data, the same for the statistics below), up by 21.7% on a year-on-year basis. Since 2001, the output of aluminum oxide grew year by year,with an annual growth rate of 22.25%; the output of electrolytic aluminum was 16.1945 million tons, up by 26.07% on a year-on-year basis, its percentage in the global output of electrolytic aluminum surpassed 40% for the first time; the output of aluminum products was 20.2605 million tons, up by 22.76% on a yearon-year basis.

At the beginning of 2010, the sustained rise in domestic and overseas aluminum prices drove the aluminum oxide price to surge continually;driven by high aluminum oxide price, China’s aluminum oxide enterprises basically restored production in the first quarter of the year,meanwhile a batch of technological upgrading,expansion and newly built capacity projects also started operation gradually.

With the gradual recovery of China’s aluminum market in 2009, at the beginning of 2010 the production capacity of electrolytic aluminum enterprises started to be released in massive quantity. Apart from the gradual re-startup of original capacity, a group of newly built and expanded production capacity also entered the market, as a result the output of electrolytic aluminum continued to surge, and recorded a historical new high in June, reaching 1,424,500 tons. In the second half of the year, all regional governments one after another tightened control over “power limit” in order to fulfill their task of energy saving and emission reduction,which resulted in close-down of some plants,the monthly output of electrolytic aluminum dropped monthly, but rebounded to some degree in December.

Under the impact of industry rejuvenation plan and multiple favorable policies, the domestic market demand for aluminum products increased, the overall scale of aluminum processing industry and average enterprise scale showed further growth. In 2010, China’s aluminum output topped 20 million tons; the total output of top 10 provinces in aluminum product output was 17.0216 million tons, accounting for 84.01% of total output nationwide.

In 2010 China’s total import and export amount in aluminum product trade was 20.248 billion USD, up by 32.21% on the basis of 15.315 billion USD in 2009, accounting for 16.83% of the total import and export amount of nonferrous metal, in which import was 11.065 billion USD, up by 9.28% on a year-on-year basis; export was 9.183 billion USD, rising sharply by 76.97% on a year-on-year basis; trade deficit was 1.882 billion USD, down by 61.89% on a year-on-year basis. The import and export of aluminum products basically reflected a pattern of significant drop in imported electrolytic aluminum and fast growth in the export of aluminum alloy and aluminum products.

Since the beginning of 2010, the ratio between domestic and overseas aluminum prices gradually returned to normal level and became stable, which evidently improved import/export situation and eased the supply pressure of aluminum related products in China. In 2010,China imported 364,900 tons of unwrought aluminum, down by 79.02% on a year-on-year basis; wherein, imported non-alloy aluminum was 229,900 tons, down by 84.64% on a yearon-year basis; imported aluminum alloy was 135,000 tons, down by 44.52% on a year-onyear basis. The drop in import to some degree eased the supply pressure on the domestic market. However, as the operating rate of domestic electrolytic aluminum enterprises continued to rise, the sharp increase in domestic aluminum output brought huge impact on the aluminum market. In 2010, China’s exported unwrought aluminum was 754,400 tons, up by 1.43 times over that in 2009; wherein, exported non-alloy aluminum was 193,500 tons, rising sharply by 321.62%; exported aluminum alloy was 560,800 tons, up by 112.17% on a year-on-year basis. In 2010 China’s net export of unwrought aluminum was 389,400 tons; in 2009 its net import was 1,428,900 tons; wherein, net import of non alloy aluminum was 36,400 tons; in 2009 the net import was 1,450,200 tons, dropping sharply by 97.49%.

In 2010, China imported 590,600 tons of aluminum products, up by 1.58% over that in 2009; its export of aluminum products was 2,177,100 tons, up by 56.2% over that in 2009.Whole year net export of aluminum products was 1,586,500 tons, up by 95.28% over that in 2009.

In 2010, China’s investment in aluminum mining and dressing projects was 4.934 billion yuan, up by 34.04% over that in 2009, accounting for 6.49% of finished fixed asset investment of nonferrous metal mine projects. Investment in aluminum smelting (including aluminum oxide and electrolytic aluminum)was 46.004 billion yuan, up by 24.68% over that in 2009, accounting for 29.48% of finished fixed asset investment of nonferrous metal mine projects, which was higher than copper smelting and lead-zinc smelting investment level.

The implementation of energy saving and emission reduction policy brought tremendous impact on the supply and demand structure of the aluminum market from two aspects. Firstly, the implementation this policy promoted relevant industries to expand the application of aluminum, in order to achieve energy saving and emission reduction; secondly, it effectively restrained the urge to release huge production capacity, and relatively eased the pressure of supply surplus. In order to fulfill the energy saving and emission reduction target in the“Eleventh Five Year Plan” period, the State Council enforced special supervision on key areas in 18 provinces, and electrolytic aluminum industry was included in the list. Starting from August 2010, areas in East China, North China and Southwest China adopted power restriction measures in succession, and in September some electrolytic aluminum plants in Guangxi became the first batch of enterprises to reduce actual production; as the intensity in implementing energy saving and emission reduction gradually heightened, some electrolytic aluminum enterprises in Henan, Guizhou and Sichuan provinces also enforced production reduction and production restriction to various degrees according to requirements; wherein Henan Province was particularly noteworthy.However, at the end of 2009 and the beginning of 2010, several large electrolytic aluminum projects in the western region one after another released production capacity, so as to lead to a whole year output growth of 26.07%.

Meanwhile, the National Reserve Bureau twice sold altogether 213,000 tons of aluminum ingots in November 2010; therefore the market supply and demand for aluminum ingot basically remained balanced.

Aluminum consumption related industries performed very well. Transport and shipping,building and real estate industries showed significant growth in their demand for aluminum products. In 2010, China’s aluminum consumption volume was 16 million tons; according to statistics of the China Association of Automobile Manufacturers, in 2010 automobile output and sales were respectively 18,264,700 vehicles and 18,061,900 vehicles, up by 32.44%and 32.37% respectively on a year-on-year ba-sis, recording historical new high, and ranking top in global output and sales. The total assembly volume of China’s light vehicles showed fast growth under incentive policies of the government. By the end of 2010, the operation mileage of China’s high-speed rail has reached 7,531 km, making China the country with the longest operation mileage in high-speed rail and the largest existing construction scale. In 2010, China’s real estate industry also showed strong growth. Between January and November, the housing construction area of real estate developers nationwide was 3.843 billion sqm,up by 28.6% on a year-on-year basis.

Newly built Aluminum oxide production capacity displayed the following features: the production capacity shifted toward Shanxi,Yunnan, Guizhou, and Guangxi where there are abundant resources, the usage of bauxite ore with low aluminum-silicon ratio has become increasingly highlighted; the newly added capacity applied serial process technique; the technology to use high aluminum content coal ash to extract aluminum oxide has achieved industrialization.

By the end of 2010, there were 11 enterprises with electrolytic aluminum capacity at or above 500,000 tons in China, accounting for 67.05%of nationwide capacity; there were 9 enterprises with electrolytic aluminum capacity above 500,000 tons, accounting for 64.7% of nationwide capacity. The output of top ten aluminum industry groups and large enterprises was 10,855,500 tons, accounting for 67% of the total output.

Electrolytic aluminum 160kA and above tank models accounted for 94% of total capacity,300kA and above tank models accounted for 50% of total capacity; there were already 14 lines of 400kA tank models in active operation,the first production line with 500kA tank model has partially developed capacity. The number of enterprises with total industrial chains in coal-power-aluminum and aluminum oxide,coal-power-aluminum-aluminum processing is on the rise.

Concerning phasing out backward production capacity, the industry has fulfilled the quota allocated by the state government for 2010. In recent years, under the double pressure from government policy and temporary surplus of production capacity, the industry has phased out 700,000tons/year capacity of 100kA and below electrolytic cell model, there still remained less than 600,000 tons/year capacity,which is expected to exit the market in 2011.

In recent years, the distribution of aluminum processing enterprises began to move toward product consumption regions, in order to reduce transport cost and shorten delivery time.While moving closer to consumption regions,issues such as raw material, energy and labor were also taken into consideration, for instance,aluminum processing industry developed quickly in Henan, Shandong and other regions.

Meanwhile, driven by policies in energy saving, emission reduction, and structure adjustment, the development model of aluminum upstream and downstream integrated industrial chain has been continuously popularized. Electrolytic aluminum enterprises extend toward downstream industry, and adjust industry structure based on the development model of electrolytic aluminum-aluminum processingaluminum deep processing. Centering on rich coal resources, some aluminum product manufacturers with substantial strength are also building new aluminum alloy products or small and medium sized aluminum production bases in western regions.

Since 2010, China’s aluminum industry has further reached the industry consensus of focusing on deepening energy saving, emission reduction, and cost reduction driven by innovation and technological progress. The whole industry has extensively improved awareness on energy saving and emission reduction, improved ability in independent innovation, and quickened pace in making technological progress.

The technology to extract fine iron powder from red mud has matured; some enterprises have begun to enjoy the benefits. The 200,000 tons/year production line to extract aluminum oxide from powder coal ash of Datang Power Inner Mongolia Tuoketuo Aluminum Company was successfully launched into production on August 30th, 2010. The comprehensive use of high aluminum content powder coal ash will enable China to be further guaranteed in aluminum oxide resource. It will further improve the ability to guarantee the raw material supply for China’s electrolytic aluminum industry, and ensure strategic security in the resource supply for China’s aluminum industry.

The industry-wide popularization of special shape cathode electrolytic cell, new structure diversion trench and highly efficient energy saving electrolytic tank in the industry was the highlight in the electrolytic aluminum industry in 2010.

On the basis of successfully developed car body profile for 380A motor train unit, the car body profile for 500 km/h above motor train unit was successfully developed at the end of December 2010. The self developed world first 10000 tons extrusion machine currently can produce seamless aluminum pipe products with diameter up to 400mm.

Since 2010, the energy consumption of China’s aluminum smelting enterprises dropped month by month. Enterprises have obtained satisfactory energy reduction effects by optimizing technical parameters, and implementing energy-saving technology upgrade.

In December 2010, the comprehensive energy consumption of aluminum oxide was 653.75 kg standard coal/ton, and whole year aluminum comprehensive energy consumption totaled 632.44 kg standard coal/ton, down by nearly 24.25 kg standard coal/ton from the 656.69 kg standard coal/ton in 2009. The comprehensive energy consumption to produce aluminum oxide by using domestic diasporic bauxite Bayer method has dropped to 400-450 kg standard coal/ton.

In 2010 China’s average comprehensive AC power consumption for electrolytic aluminum was 13.979 kilowatt-hour/ton, down by 192 kilowatt-hour/ton from the 14,171 kilowatthour/ton in 2009. Whole year power saving reached 2.463 billion kilowatt-hour/ton,equivalent to 845,200 tons of standard coal;wherein the energy consumption per tonne of aluminum in December 2010 was 13,933 kilowatt-hour.

Among the 66 aluminum smelting enterprises which are incorporated into the statistics of the Association, the best index of comprehensive AC power consumption for aluminum ingot was 13,182 kilowatt-hour/ton.