Supply shortage has turned over, China's alumina capacity surge is worrying
China is the largest producer of metal aluminum and the largest consumer country. However, due to the relatively limited domestic bauxite resources, bauxite and alumina have long relied heavily on imports. However, with the rapid expansion of domestic alumina production capacity in recent years, the situation of alumina imports has undergone a major change, and in 2018, there has been a net export situation. Since November 2018, the export volume of alumina has gradually declined, which is due to the sharp drop in overseas prices and the weakening of export profits. However, considering that domestic electrolytic aluminum capacity expansion has received control, and the expansion of alumina has not retreated, the pattern of domestic supply from shortage to surplus has been formed.
I. Domestic alumina imports
The domestic alumina industry and electrolytic aluminum have developed at a high speed, but there is a certain gap in the overall supply of alumina, which depends on some imported supplements. Imports reached a peak of 7 million tons in 2005, close to half of domestic consumption. Imports remained at a high level in 2006, and then fell to 5 million tons, which is a gradual decline in domestic alumina consumption. Since 2016, the import volume of alumina has further dropped below 3 million tons, which has decreased to the proportion of domestic consumption. In 2018, the import volume has dropped to 510,000 tons. Due to the export of 1.46 million tons in the year, the historical net export in 2018 resulted in a net export volume of 950,000 tons.
Export profits were weakened due to the fall in overseas alumina prices. After exports reached 460,000 tons in October, exports gradually declined. In January 2019, exports fell to 136,000 tons. At present, when export profits are limited, it is difficult to increase the export of alumina. However, the era of large imports is never going to return.
Second, domestic alumina supply and demand balance
Domestic alumina production growth is basically in sync with electrolytic aluminum, which has grown rapidly since 2010. According to data from the International Aluminium Association, China's smelting grade alumina production in 2018 is close to 68 million tons, while China's electrolytic aluminum output reached 36.48 million tons. From the perspective of supply and demand balance, there is still a certain supply gap throughout the year. In 2018, the domestic alumina supply gap is around 3.17 million tons, but this gap is significantly smaller than the gap of nearly 5 million tons in previous years.
From the monthly data, due to the new domestic alumina production in the fourth quarter of last year, domestic production maintained a certain growth, while electrolytic aluminum production decreased significantly, operating capacity decreased, and the alumina supply gap narrowed rapidly. In December 2018, there was still a gap of 203,000 tons of domestic alumina supply, and by January 2019, the export supply was over 33,000 tons. In the first quarter, the domestic electrolytic aluminum operating capacity still has a certain decline overall, while alumina production continues to climb, which means that domestic alumina supply will continue to be surplus.
Third, domestic alumina new capacity
In 2017, the domestic supply-side reform policy was vigorously implemented, and the expansion of electrolytic aluminum capacity was effectively controlled, and the capacity ceiling was set. However, so far there has not been a clear restriction on the development of alumina in China, and the capacity expansion of domestic alumina enterprises is still very strong. Up to now, the domestic built alumina production capacity has exceeded 80 million tons, and the operating capacity is about 75 million tons. Among them, the newly added capacity in 2018 is 6 million tons. However, the increase in electrolytic aluminum production capacity during the same period is relatively limited, and the operating capacity does not rise and fall.
At present, the new capacity of domestic construction and production plans in 2019 is about 6.8 million tons. In the same period, the domestic production capacity of electrolytic aluminum is about 3.1 million tons. In 2020, there are still more than 8 million tons of new construction and expansion projects. According to this trend, domestic alumina production capacity will exceed 100 million tons in the next few years, and there will be a large surplus with respect to the 45 million tons of electrolytic aluminum capacity limit.
Fourth, the policy is ready to go
As alumina is a highly polluting industry, on the one hand, it needs to consume a large amount of bauxite resources; on the other hand, its by-product red mud requires a large area of yards, and the management of the yard is slightly inadvertent, causing serious environmental pollution caused by red mud dams. Large-scale capacity expansion will inevitably bring a serious environmental burden. Therefore, relevant departments have begun to pay attention to related issues.
At the beginning of August 2018, five alumina projects were cancelled in Chaoyang City, Fuxin City, Dandong City, Huludao City and Yingkou City of Liaoning Province. The annual production capacity of alumina in the project totaled 10 million tons. Mainly for environmental considerations.
In December 2018, the National Development and Reform Commission and the Ministry of Industry and Information Technology jointly issued a notice on promoting the orderly development of the alumina industry. The notice mentioned that due to factors such as fluctuations in the international market and price increases at the beginning of this year, some enterprises are blindly optimistic about the market prospects. As soon as they are concerned, planning to build a number of alumina projects in coastal areas has caused serious overcapacity in the industry. Affected the healthy development of the industry. The relevant requirements of the notice also require strict implementation of safety, environmental protection, energy consumption, quality and other requirements, strengthen industry self-discipline, strict project management, and propose to encourage enterprises to aim at the comprehensive recovery rate of alumina to more than 80%, comprehensive energy consumption per ton of alumina. Below 380 kg of standard coal, tons of alumina new water consumption is less than 3 tons and other advanced indicators. It can be seen from the notice that the relevant ministries have noticed that the disorderly expansion of electrolytic aluminum production capacity in the past few years is taking place in alumina, and it is not ruled out that the policy of controlling production capacity will be introduced later.
With the rapid expansion of domestic alumina production capacity, domestic alumina supply has changed from shortage to surplus, and the surplus situation is expanding. The accelerated expansion of alumina production capacity will not only cause serious overcapacity in the industry, but also increase the domestic environmental burden. In addition, overcapacity will undoubtedly suppress corporate profits, which is detrimental to the healthy development of the industry. Therefore, the introduction of relevant policies may be imperative.