Soaring aluminum prices reduce profits for processors – Nanshan exec

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TAIYUAN, China: Aluminum processors in China face weaker profits this year due to soaring metal prices, the chairman of Shandong Nanshan Aluminum Co Ltd. said on Thursday.

Prices for aluminum, used in products ranging from cans to airplanes, have risen by more than 50% this year due to strong demand and production declines due to an energy crisis and flooding in the main Chinese producer.

“Aluminum prices have increased dramatically… (and) rising transportation costs, price differentials and exchange rates all have a big impact on processors,” said Lu Zhengfeng, chairman of the company. based in Shandong speaking at the Antaike International Aluminum Week. .

The most-traded November aluminum contract on the Shanghai Futures Exchange reached its highest level since May 2006, while three-month aluminum on the London Metal Exchange was at its highest since July 2008.

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Chart: Aluminum price https://fingfx.thomsonreuters.com/gfx/ce/mopanjlymva/aliper cent201.png

Electricity prices have reached record highs in recent weeks, due to power shortages in Asia and Europe, with China’s crisis set to last until the end of the year, hampering the growth of the second-largest economy global.

Chart: Global Coal Prices Rise Due to Booming Electricity Consumption and Supply in China https://fingfx.thomsonreuters.com/gfx/ce/zjpqkekmlpx/WorldCoalPrices.png

The energy-intensive aluminum smelter is expected to be one of the most affected metals sectors.

Lu expects manufacturers’ revenues this year to be lower than in 2020 and face an even more difficult period after October.

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“The high upstream aluminum prices have already passed on to manufacturers, and manufacturers need to shift the costs to the downstream sector,” Lu said, adding that he was uncertain whether the aluminum end users would accept that.

China’s state reserves office has sold 280,000 tons of aluminum so far this year in an attempt to reduce prices, but Lu said the volume was “too small” and would not have a big impact. .

Soaring prices for metals such as magnesium and silicon – the ingredients of aluminum alloys – have also hurt manufacturers, said Wang Weidong, analyst at the public research house Antaike.

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Wang said aluminum consumption this year was below market expectations, especially in the real estate and infrastructure sectors.

Yao Xizhi, chief analyst at Chalco Trading Group, warned that production could be affected due to recent power cuts, with China saying it is prioritizing residential use.

Antaike predicted that the Chinese aluminum market would fall into a deficit of 200,000 tonnes in 2022 from a surplus of 180,000 tonnes this year, and forecast Chinese state reserve sales of 300,000 tonnes next year.

Graphic: Aluminum scale https://fingfx.thomsonreuters.com/gfx/ce/zgvomrkjnvd/aliper cent202.png

(Reporting by Min Zhang in Taiyuan and Mai Nguyen in Hanoi; Editing by Mark Potter and Jan Harvey)

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