(Bloomberg) — China’s aluminum industry, the world’s largest, is nearing an inflection point this year, as limits on capacity begin to curb production and entice firms to expand overseas.
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The government capped annual capacity at 45 million tons in 2017 to tackle excess supply and emissions. That ceiling’s already been reached, and annual figures on Friday are expected to show output in 2024 hitting a record of more than 43 million tons.
It means production growth has to moderate, which may leave less metal available for export and support prices at a time when sanctions on aluminum from Russia, historically another big exporter, could be about to tighten further. Chinese output is likely to expand only 2% in 2025, from an estimated 3.9% last year, according to Shanghai Metals Market, before shrinking to just 0.7% in 2026.
Aluminum prices have been largely rangebound in recent months, and are likely to drop during the market’s quiet period through the Lunar New Year, according to Howard Lau, China materials analyst at HSBC Holdings Plc. But they could be poised for a rebound after that given the supply limitations and expectations for demand.
“Structural demand growth from renewables will continue to offset weakness in the property sector, and will continue to be a focus of the ongoing economic stimulus in China,” Lau said in a note last week.
China’s price advantage helped boost exports of aluminum products by 17% last year to a record 6.7 million tons. That’s likely to dissipate after tax rebates were removed in December and as production growth eases. SMM said overseas sales may drop as much as 9% in 2025, which could mean higher international prices of the lightweight metal.
The curbs on domestic expansion have already led Chinese smelters to build plants in Indonesia to tap bauxite resources there, although the reliance on carbon-heavy coal power and the slow pace of infrastructure development are concerns, said SMM analyst Cassie Yao.
Some smaller smelters have also looked at South America and Africa for expansion, but those efforts are at a very early stage, she said.
On the Wire
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Story continues
New loans extended by Chinese banks posted their first decline since 2011 last year, underscoring weak demand for financing in an economy plagued by deflation and a housing slump.
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CCTD’s weekly online briefing on Chinese coal, 15:00
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China Silicon Industry Association’s weekly price assessment
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China New Energy International Investment Conference in Beijing
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China’s weekly iron ore port stockpiles
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Shanghai exchange weekly commodities inventory, ~15:30
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