China faces tough time curbing aluminium growth
Date: 01-May-02
Country: CHINA
Author: Lee Chyen Yee
The central government will find it difficult to get local authorities to produce less as smelters are key employers and revenue contributors, they said.
Analysts stuck to their earlier estimates for China's aluminium output for 2002, which is expected to rise to more than four million tonnes from 3.42 million tonnes last year.
"The unregulated expansion in the aluminium industry will be a waste of the country's vast resources and capital if it is not curbed quickly," the State Economic and Trade Commission (SETC) said in a proposal posted on its Web site www.setc.gov.cn.
With the brisk rate of expansion, China's output capacity of the metal - used to make cables, cans, cars and windows - is expected to hit a high 6.8 million tonnes per year (tpy), outstripping demand of 5.5 million tonnes by 2005, the SETC said.
It said in the proposal approved by the State Council, China's cabinet, earlier this month, that aluminium projects, including foreign-invested ones, would have to meet a list of criteria before the central government gave its nod.
The government requires projects to conform to environmental standards to prevent pollution - a major problem in the industry.
Financial institutions and commercial banks can only provide funds to aluminium producers already approved by the central government, the proposal said.
CAN'T APPLY THE BRAKES
China, which has some 120 aluminium producers, has 23 projects in construction to add 1.36 million tpy to capacity and another 24 planned projects would contribute 2.84 million tpy more, it said. With some slated for completion this year, China's fast growing aluminium output capacity is expected to hit more than five million tonnes per year (tpy) this year from 4.26 million tpy, analysts said.
Analysts said there were few signs of abating aluminium output for the rest of the year from the 23 percent rise in the first quarter to 967,000 tonnes.
"We will see the output rise maintaining roughly at this level in the next few months as producers are expected to export some excess metal," said an analyst with state-owned metal analyst group Antaike Information Company.
China has been flooding the aluminium market, reflected in Singapore's LME stocks surging to more than 200,000 tonnes, and exports which rose a stellar 91.5 percent to 107,518 tonnes in the first three months of this year, official figures showed.
Analysts attributed the brisk expansion to plans already approved before the SETC proposal was released and the unwillingness of local governments to stem inefficient smelters as they are a good source of income and jobs provider.
Major producers like Shanxi Guanlu have already secured official approval to boost capacity by more than 50 percent to 310,000 tpy.
"Some local authorities have vested interest in the smelters and it might be tough for the central government to put its finger in every pie, especially in the smaller areas," said an analyst in Shanghai.
"We'll probably see the impact of the proposal on the industry next year, not this year," he said.