China’s aluminum production rose 7.5% in the first two months of 2023, official data showed on Wednesday, after the end of strict Covid-19 controls improved the economic outlook and lifted demand expectations.
The primary aluminum output in China, the world’s largest aluminum producer, reached 6.74 million tonnes in January-February from 6.33 million tonnes the same period a year earlier, according to data from National Bureau of Statistics (NBS).
That marked the highest output for the two months since at least 2015.
China’s lifting of Covid restrictions late last year, together with a number of policy moves to bolster its economy and property sector have buoyed hopes for a jump in domestic demand for aluminum, which is used in construction, transportation and packaging.
Bullish sentiment sent the benchmark aluminum contract on the London Metal Exchange up to a seven-month high of $2,658.50 a tonne on Jan. 25.
Profitable market conditions amid a rise in domestic prices also propelled producers’ willingness to operate, participants said.
Average industry profits were estimated by Mysteel at 1,063 yuan ($154.48) per tonne in January and 1,670 yuan per tonne in February.
New production capacity came on line in January and February in northwest Gansu province, and smelters in the southwestern region including Guizhou, Guangxi and Sichuan ramped up production.
Nevertheless, aluminum output growth could be limited by the country’s power supplies.
The southwestern Yunnan province asked its local aluminum producers to further reduce their power use in late February because of a power supply crunch.
“The power curb in Yunnan is likely to constrain supply,” said Liu Xiaolei, an aluminum analyst at Shanghai Metals Market, forecasting China’s primary aluminum output will rise around 3% this year.
Weakening consumption in Europe and the US will negatively impact China’s aluminum product exports, lowering demand for primary aluminum, he added.
Production of 10 nonferrous metals – including copper, aluminum, lead, zinc and nickel – rose 9.8% to 11.92 million tonnes in January and February combined, compared with a year earlier.
The other non-ferrous metals are tin, antimony, mercury, magnesium and titanium.
The total nonferrous metal output was also the highest for a January and February period since at least 2015, the data showed.
($1 = 6.8810 Chinese yuan renminbi)
(By Siyi Liu and Dominique Patton; Editing by Neil Fullick and Jamie Freed)