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China Expects Strong Aluminum Growth

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The boom in China's aluminum exports is driving an increase in domestic aluminum production and consumption, industry insiders said at the China International Nonferrous Metals Market Conference 2007, held in Hong Kong May 30.
China is set to produce 12.4 million tons of primary aluminum this year, up 32 percent from last year, while capacity is set to reach 15.7 million tons, according to a prediction by Wang Feihong, a senior analyst with Beijing Antaike Information Co. Ltd., a consultancy affiliated with the China Nonferrous Metals Industry Association.
China's primary aluminum output reached 9.4 million tons in 2006, rising 20.4 percent from 2005 and soaring 117.5 percent from 2002.
China produced 8.15 million tons of aluminum products in 2006, making the country the world's largest aluminum fabricator. China was also the world's largest exporter of aluminum products last year, exporting 1.24 million tons of aluminum products.
"China's primary aluminum consumption was mainly invigorated by aluminum product exports, aluminum consumption for expanding aluminum plants, and its use as a substitute for other metals in downstream industries," Wang said.
Actual consumption stood at 25.08 million tons in the first quarter this year, climbing 45.3 percent from the same period last year, according to Antaike.
Wang predicts that China's primary aluminum consumption will increase to 11.75 million tons this year, rising 35.5 percent from last year.
Following China's policy to increase the export tax on primary aluminum from 5 percent to 15 percent on Nov. 1, 2006, domestic aluminum capacity has rapidly shifted to aluminum processing capacity, which has seen the output of mainly low-level and semi-finished aluminum products, vice director of the China Nonferrous Metals Industry Association, Wen Xianjun, said.
"However, China remains a net importer of high-level aluminum products. In 2006, China's net imports of high-precision aluminum strip amounted to 223,000 tons," he said. The average price of imported aluminum products in 2006 was $944 higher than the export price, according to Wen.
The dramatic growth in semi-finished aluminum product exports has prompted the government to consider reducing the value-added tax rebate (VAT) on aluminum products, and a policy is expected to be released during the second half of the year.
China exported 605,522 tons of aluminum products in the first four months of this year, up 95.6 percent from the same period last year.
"The government intends to reduce low-level aluminum product exports, and guide the industry towards higher value-added products," he said.
However, Wen believes that domestic consumption and the export of aluminum products will maintain its growth momentum for some time after the policy takes effect, supported by a growing global economy.
The production of aluminum plate, strip and foil will exceed 3 million tons this year, and the production of extruded aluminum products will climb to 4.51 million, Wen predicted.
China's aluminum products are mainly used in power grids, construction, transportation and electric appliance industries.
Downstream consumption of aluminum plate, strip and foil, and aluminum extruded products makes up more than 60 percent of domestic aluminum consumption.
China's aluminum fabricating capacity will grow 51 percent from 15.54 million tons in 2006, to 23.45 million tons in 2010, according to an Antaike prediction.
CNMIA's Wen commented that the growth rate in primary aluminum consumption will remain high until 2010, due to the rapid development of China's aluminum fabricating sector. Aluminum prices are directly connected to aluminum product growth, he said.
The use of scrap aluminum in aluminum product fabrication is still rather rare in China, due to restraints on the import of scrap aluminum, and a lack of aluminum recycling regulations, Wen pointed out.
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