Ministries and cCommissions Including the National Development and Reform Commission Plan to Stop 70 Billion Worth of Aluminum Projects

Su Bo, Deputy Minister of the Ministry of Industry and Information Technology, disclosed in an internal industry meeting held on April 8th that, recently eight ministries and commissions including the National Development and Reform Commission, and the Ministry of Industry and Information Technology would jointly issue decree to put a uniform stop to the planned aluminum projects. According to industry insiders, this decree will abort planned aluminum investment projects valued at over 70 billion yuan.

“This decree is originally planned to be released in March, and is already delayed.” According to insiders familiar with the situation,the decision to clean up planned aluminum projects by the Ministry of Industry and Information Technology this time could be traced back to one report received by the State Council before the Spring Festival this year. According to this report, the operating rate of domestic aluminum production capacity is only around 60%, there is excessive production capacity.

Afterwards, the Ministry of Industry and Information Technology published a special topic report on this issue, the report cited data from the National Bureau of Statistics, saying that in 2010 the national aluminum output is 15,650,000 tonnes, whereas national aluminum production capacity is about 21,000,000 tonnes,there exists excessive production capacity, for instance some enterprises in Xinjiang and other regions rushed to make investment.

However, inside the industry there are different views on the existence of excessive aluminum production capacity. According to statistics of China Nonferrous Metals Industry Association,in 2010 nationwide output of aluminum was 16,190,000 tonnes, allowing for the restriction in coverage scope of statistics criteria by the Association, industry insiders widely considered that last year the actual output of aluminum was between 17,500,000 and 17,800,000 tonnes. This figure differed from that released by the Bureau of Statistics by 2,000,000 tonnes,and it is exactly this discrepancy that makes the conclusion of “excessive production capacity”less convincing in the eyes of the industry insiders.

“In fact, last year the domestic primary aluminum consumption market is a market with shortage, or in other words it is a market for inventory reduction”, one aluminum industry expert told the reporter of China Securities Journal.

However, different voices inside the industry seemed not enough to stop the distribution of the decree. According to relevant news, at present in China there are a total of over 20 billion yuan of investment in aluminum projects under construction, the investment for planned projects is over 70 billion yuan.

The administrative paper from the ministries and commission including the National Development and Reform Commission seemed also contradictory with the “Twelfth Five Year”development plan of the nonferrous industry.Kang Yi, who has just retired from the post of Chairman of China Nonferrous Metals Industry Association, pointed out that during the Twelfth Five Year period, the nonferrous metal industry will, through industry policy guidance,further optimize distribution, strictly control newly built smelting projects in regions with no guarantee in resource and environment capacity. Wherein, aluminum production capacity will move to the west in an orderly manner.

According to Shan Guibin, analyst on aluminum industry in the consulting organization www.aladdiny.com, the aluminum projects now being planned in China are mainly concentrated in western regions, especially Gansu,Xinjiang, and Inner Mongolia where power cost is relatively low.

If the Ministry of Industry and Information Technology stopped all planned aluminum projects, then, it might not be possible to fulfill the target in the “Twelfth Five Year” period to shift aluminum production capacity to the west.Meanwhile, according to Kang Yi, during the“Twelfth Five Year” period, the nonferrous metal industry will be dominated by growth control. During the “Twelfth Five Year” period, the main targets for development and planning of the nonferrous metal industry are:The nonferrous industry will optimize industry structure, improve development quality and benefits, effectively control the over-fast growth of smelting production capacity. During the “Twelfth Five Year” period, the added value of the nonferrous metal industry (comparable price) will have annual average growth of 10%, the annual average growth margin of the output of ten kinds of nonferrous metal will be kept around 8%. Furthermore, industry structure will be further upgraded, by 2015, above 90% of aluminum production capacity will have self-equipped power supply or directly purchased power supply, above 95% of copper smelting and aluminum equipment will reach world leading standard, above 85% of lead zinc smelting equipment will reach world leading standard.