Chinese Aluminum Production Jumps

Reuters: China's aluminium market shrouded by statistical smoke and mirrors: Andy Home
If the figures are to be believed, Chinese output slumped by an annualised 6.6 million tonnes in the December-February period only to surge back by 5.2 million tonnes in March and April.

Except anyone who knows how an aluminium smelter works will tell you the figures don't make any sense.

Looking for example at the apparent 4.8-million tonne increase between run-rates in February and March, Paul Adkins of consultancy AZ China noted wryly that the month-on-month jump was equivalent to "10 smelters running at full speed on March 1 after being idle on February 29".

Volatility is nothing new to these Chinese aluminium production figures, particularly around the turn of the year, both calendar and lunar, but this year's variance is unprecedented.

Perhaps the best way to penetrate the statistical smoke is to look at annualised production over a longer period.

On this basis April's run rate was 31.3 million tonnes, down a net 1.79 million tonnes from September last year.

That would tally with the anecdotal evidence that capacity was indeed curtailed as local prices fell below 10,000 yuan per tonne in November, lower even than during the worst of the Global Financial Crisis in 2008-2009.

The figures for March and April would also suggest, however, that restarts may already be happening, albeit not on a scale implied by that month-on-month explosion in output in March.

And Chinese smelters right now have every incentive to lift output rates, given the strength of the rally in Shanghai prices.

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