Many parts of the world have seen clear signs of aluminum scarcity; But it is China that is suffering the most serious shortage
Recently, the world media has turned over information about the huge aluminum stockpile in Vietnam related to China, with a value of up to 5 billion USD at current market prices.
This aluminum stockpile is said to be large enough to end a global shortage, but it cannot be used…
After years of oversupply, the world has witnessed a trend reversal in the aluminum industry. Aluminum prices escalated, inventories fell sharply. In particular, while the world began to restore production after a difficult time because of the COVID-19 pandemic, demand increased, but China limited supply.
“Aluminium stocks are falling at a very rapid rate – leaving everyone on edge for not being prepared,” said Kamil Wlazly, senior analyst at Wood Mckenzie in London, UK.
Many parts of the world have seen clear signs of aluminum scarcity; But it is China that is suffering the most serious shortage.
How is China “thirst” for aluminum?
Bloomberg, citing information from the AZ research team, said that the total aluminum inventory in China is currently only about 1.2 million tons – equivalent to the need for 2 weeks. This situation has turned China from an exporter to a major importer of aluminum in the world, causing a rapid decline in global aluminum stocks.
At the end of December 2020, Reuters recorded China’s aluminum imports reaching a record high – exceeding the peak previously set in 2009; and this country’s “crazy” to import aluminum has been recorded before and continued this year.
Specifically, in July 2020, China’s aluminum imports increased by 570% compared to the same period in 2019 and increased by 35.5% compared to June 2020. This situation will continue until the end of 2020 and into 2021, causing customers in the US to compete for aluminum with Chinese companies.
It is known that since accelerating imports in the second quarter of 2020, China has collected 1.8 million tons of aluminum ingots; contributed to pushing aluminum prices up non-stop, reaching the highest level in more than 10 years.
Illustration
China’s aluminum industry in crisis
As the energy crisis in China spread, aluminum prices skyrocketed.
Aluminum prices spiked to a 13-year high of $3,000 per tonne in October this year, the highest price since 2008. Prior to that, aluminum was typically priced in the $1,500 to $2,000 ton range. .
Aluminum production relies heavily on electricity. Each ton of aluminum requires around 14MWh to produce – equivalent to the average UK household energy use over three years.
Even if the energy crisis is resolved, Beijing will place a hard limit on future capacity to produce the metal in an effort to limit energy use and meet its curbing target. emissions.
Many Chinese aluminum smelters – including the provinces of Inner Mongolia, Guizhou, Henan, Qinghai, Guangxi, Yunnan and Ningxia – have been affected by the energy crisis and have had to cut output. in this year.
Mok Yuen Cheng, senior editor at S&P Global Platts, said: “During winter, energy demand will be more and China’s power shortage is expected to continue at least. is in the first quarter of 2022”.
Globally, those who depend on a steady supply of aluminum have expressed deep concern about the current shortage situation in China.
Many businesses and industry experts have prepared for the prospect that aluminum supply will continue to decrease in 2022 and the shortage will continue for the next 5 years, according to Bloomberg.
Shortages of raw materials such as aluminum will further complicate supply chain problems facing Chinese manufacturers.
“For us, it’s been a mess,” said Mike Keown, CEO of Commonwealth Rolled Products. “We think [the aluminum shortage crisis] is just getting started.”
Imported aluminum shipment in Wuxi. Photo: Reuters
“Aluminum mountain” in Vietnam: China also gave up?
A 1.8 million-ton aluminum warehouse worth $5 billion was blocked from exporting by Vietnam in 2019 within the framework of an anti-dumping investigation initiated by the US. This investigation targets Chinese billionaire Liu Tianzhong, who is known as the “aluminum king”.
The investigation has not ended, although the initial investigation conclusions with the company that imported this aluminum in Vietnam have been canceled due to lack of evidence.
Currently, this “aluminum mountain” is still being kept under the supervision of Vietnamese security officers. Only a small amount of that has made it to the production line.
In addition to legal reasons, experts also do not expect much of this stockpile to be released to the market.
CRU – one of the most important consulting firms in the industry – has removed its 1.8 tonnes of aluminum stockpile in Vietnam from its inventory estimate. Accordingly, the company believes that a part of this “aluminum mountain” may have to be sold as scrap because it is more than 10 years old.
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