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China's environmental crackdown hits August metals output

14th September 2017

By: Reuters

  

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BEIJING - China's nonferrous metal output fell to a one-year low in August, in a sign that Beijing's environmental crackdown is curbing supplies of base metals, with aluminium also hit by efforts to rein in output.

Production of 10 nonferrous metals - including copper, aluminium, lead, zinc and nickel - fell 2.2% to 4.42-million tonnes, official data showed on Thursday, the lowest in a year and the first year-on-year drop since December 2015.

"I think it is definitely related to the crackdown on production that will pollute the environment," said Helen Lau, an analyst at Argonaut Securities in Hong Kong.

The impact of China's environmental protection campaign was also evident in weak industrial production growth, she said.

China has launched an aggressive campaign to curb choking smog in its northern regions, promising to close more factories and enforce bigger emission cuts in coming months, along with random spot checks to ensure targets are met.

Smelters of copper and other nonferrous metals have faced closures because of the crackdown. Lead has been particularly hard hit, with 80% of illegal secondary smelters shut down since the second half of last year, according to research group Antaike.

China's primary aluminium production fell for a second successive month in August to its lowest level since April 2016, as the government's effort to curb excess smelting capacity starts to bring results.

Aluminium output fell 3.7% year-on-year to 2.64-million tonnes last month, and was down nearly 2% on July, the data from China's National Bureau of Statistics showed. The government will release a breakdown of the other individual metals later this month.

August was the first month after Shandong-based smelters China Hongqiao, the world's top aluminium producer, and Xinfa Group were forced to shut a combined 3.2-million tonnes per year of illegal capacity.

More cuts could follow, said Jackie Wang, an aluminium consultant at CRU in Beijing.

"We do think aluminium production will go slightly down going forward," she said. "Because of the supply-side reform cuts and upcoming winter cuts, we expect to see a bit of a deficit in the fourth quarter in China."

In the first eight months of the year, China produced 22.17-million tonnes of aluminium, up 6.1% from the same period last year.

January-August nonferrous production was up 4.9% at 36.4-million tonnes. The other nonferrous metals are tin, antimony, mercury, magnesium and titanium.

Edited by Reuters

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