More than two-thirds of the country’s electrolytic aluminum production capacity is “black household”

Business News Agency August 23 hearing "most of the electrolytic aluminum production capacity without state approval, mainly the National Development and Reform Commission later delegated the power to the local government departments." A large private electrolytic aluminum company executives revealed.

Authoritative sources revealed: “At present, of the more than 22 million tons of electrolytic aluminum production capacity in the country, only 6 million tons are approved by the National Development and Reform Commission, and others have not been approved.”

If the production capacity that has not been approved by the Development and Reform Commission is defined as "black households," then more than two-thirds of the country's electrolytic aluminum production capacity is "black households."

"Default" place approval?

What causes the electrolytic aluminum production capacity not to be controlled? The above-mentioned executives of the private electrolytic aluminum enterprises stated that the electrolytic aluminum industry was a profitable industry before 2008, which attracted a group of private enterprises to enter the industry, including Sichuan New Hope Group.

The most important reason is the loosening of policies. According to this high-level introduction, in order to support the development of the western region, companies are investing in electrolytic aluminum projects in the western region. Many of them do not require the National Development and Reform Commission to audit and are directly reviewed by local governments.

However, the National Development and Reform Commission has not publicly expressed similar views. “Electrolytic aluminum has always been the need for new projects to review the National Development and Reform Commission, this power has not been delegated to the local government.” Deputy Director of Aluminum Division of China Nonferrous Metals Industry Association Lang Dazhan said.

He said that not only electrolytic aluminum, iron and steel, building materials and many other industries have appeared without the National Development and Reform Commission's review of production capacity, "this is almost a common phenomenon."

In response, the above-mentioned executives of the private electrolytic aluminum enterprises stated that in the actual operation process, the enterprises invest in electrolytic aluminum projects in the western region, and the National Development and Reform Commission is actually approved by the local NDRC.

For this argument, a management company of China Aluminum Corporation, China's largest electrolytic aluminum company, said: “China Aluminum’s electrolytic aluminum production capacity and alumina production capacity were formerly very large in China, but later other companies A lot of new capacity has been built up, which has gradually reduced the company's production capacity."

The decline in profits China Nonferrous Metals Industry Association data show that from 2002 to 2006, the international aluminum price has been in a rising stage, LME spot average annual price of 1350 US dollars per ton, 1431 US dollars, 1716 US dollars, 1898 US dollars, 2569 US dollars. Driven by price increase and capacity growth, the total profits of the aluminum smelting industry during the period from 2004 to 2007 were 10.6 billion yuan, 11.9 billion yuan, 28.1 billion yuan, and 36.9 billion yuan, respectively.

It is high profits that have attracted a large number of non-aluminum industry companies. In 2005, Chinalco's alumina market share in China reached 91.67%. In the following years, with the large-scale expansion of private enterprises and local state-owned enterprises, Chinalco’s market share has gradually declined to 32.66% in 2009. From 2007 to 2009, Chinalco’s market share in the domestic electrolytic aluminum market was only 21%, 20% and 26.5%, respectively, and its domestic alumina market share was 34.1%, 29.4% and 32.66%, respectively.

Since 2008, with the outbreak of the financial crisis, the long-term accumulation of oversupply contradictions began to become prominent, and the contradiction between electrolytic aluminum excess capacity began to become more prominent. In 2008, aluminum prices entered a downward path. From 2008 to 2010, the average spot prices of LMEs were 2,572 U.S. dollars, 1,665 U.S. dollars, and 2,173 U.S. dollars, respectively.

From 2008 to 2010, the total profits of the aluminum smelting industry dropped to 12.4 billion yuan, 5.9 billion yuan and 11.8 billion yuan respectively.

By the end of 2010, the national electrolytic aluminum production capacity has reached 22 million tons, actual output is 15.6 million tons, and the utilization rate of equipment is only 70%. From January to November 2010, the profit of the aluminum smelting industry was 10.441 billion yuan, and the sales profit rate was only 3.59%, which was much lower than the average level in the industry.

“We now have lost advantages in the electrolytic aluminum and alumina industries. Companies that do not invest in projects based on national policies have seized the market.” The above management of Chinalco said.

As China Aluminum has lost its absolute advantage in the electrolytic aluminum industry, it has been forced to expand into other industries such as copper and rare metals in the past two years.

The westward shift of production capacity by the China Nonferrous Metals Industry Association data shows that the new electrolytic aluminum project is mainly located in the western region. At present, most of the electrolytic aluminum projects under construction and proposed in the country are located in the west. In 2010, the electrolytic aluminum production capacity under construction reached 4.44 million tons, of which 68% were located in the five western provinces.

Enterprises to the west to invest in electrolytic aluminum, mainly considering that the cost of electricity in the eastern region is too high, and electricity prices currently account for more than 40% of the cost of electrolytic aluminum. At present, about half of China's electrolytic aluminum production capacity is located in the eastern region, while the western region has low energy costs such as electricity prices. If the production capacity is transferred to the west, profits are still considerable.

Lang Dazhan indicated that it was precisely because of the excessive new production capacity. In the first half of this year, 9 departments including the National Development and Reform Commission and the Ministry of Supervision jointly issued the “Emergency Notice on Restraining Overcapacity and Repeated Construction in the Electrolytic Aluminum Industry and Leading the Healthy Development of the Industry”. Requirement that all parties immediately halt the proposed construction of electrolytic aluminum projects, resolutely stop any illegal production and approval of new projects that increase production capacity, and abolish local preferential policies.