CHINA’S aluminum industry will produce around 10 million tonnes of new aluminium capacity despite global cost curve and is forced to import most of its raw materials for the industry.
These remarks were made at the 16th Arabal Conference by AZ China Limited’s Managing Director, Paul Adkins, in Doha, on Thursday.
He was speaking at a panel discussion on the subject, ‘What would the aluminum policy in China be for 2012- 2013.’ “It’s not safe to talk about averages when comparing 130 smelters with cost structures that vary by up to 33 percent.
But as can be seen here, the median cash cost is around RMB15000 ($2400). But it is also clear that the range of costs is very wide, with almost 50 percent variation between the lowest and highest-cost plants,” Paul said.
He said government subsidies are taking as much as $200 per tonne of the production cost and AZ China estimates that around 25-30 percent of China’s production is presently receiving some form of government assistance.
“Government subsidises a local industry in order to protect jobs and to maintain a level of social order but these subsidies have been virtually wiped out by the market, which dropped RMB500 as soon as the news leaked out,” he said.
Questioning Chinese government’s decision of not importing aluminum, Paul said the government in order to promote domestic value-add is imposing financial penalty on imports, which is estimated around $60 billion per year.
“For the Chinese Communist Party, aluminum is an important conduit for the development, urbanisation and modernisation of China,” Paul said.
Paul wants China to take the advice of Alcoa and other firms to increase imports. “Why do they continue to add capacity at breathtaking rates,” he argued.
Paul further added that the cost curve of the aluminum industry in China will result in consumption of scarce energy resources and also jeopardise environmental integrity.
Commenting on China’s move to shift aluminum production to energy-rich western areas, Paul said this won’t solve the industry’s problems with high costs and pollution.