Equities cited Mr Paul Adkins MD of AZ China Limited as saying while speaking at the 16th Arabal Conference that China's aluminum industry will produce around 10 million tonnes of new aluminium capacity despite global cost curve and is forced to import most of its raw materials for the industry.
Mr Adkins was speaking at a panel discussion on the subject, 'What would the aluminum policy in China be for 2012 to 2013. It's not safe to talk about averages when comparing 130 smelters with cost structures that vary by up to 33%. But as can be seen here, the median cash cost is around CNY 15000. But it is also clear that the range of costs is very wide with almost 50% variation between the lowest and highest cost plants."
He said that government subsidies are taking as much as USD 200 per tonne of the production cost and AZ China estimates that around 25% to 30% of China's production is presently receiving some form of government assistance. Government subsidises a local industry in order to protect jobs and to maintain a level of social order but these subsidies have been virtually wiped out by the market, which dropped CNY 500 as soon as the news leaked out.
Mr Paul said that the government in order to promote domestic value add is imposing financial penalty on imports which is estimated around USD 60 billion per year. For the Chinese Communist Party, aluminum is an important conduit for the development, urbanization and modernization of China.
Mr Paul wants China to take the advice of Alcoa and other firms to increase imports. Why do they continue to add capacity at breathtaking rates. The cost curve of the aluminum industry in China will result in consumption of scarce energy resources and also jeopardize environmental integrity.