SMM Analysis On China September Metals Production And October Forecast

SMM, Oct 14: The followings are a detailed breakdown of China metals production in September and forecast for October:

Copper cathode

In September, SMM copper cathode production decreased by 9,200 mt MoM, a decline of 0.91%, and decreased by 0.76% YoY. From January to September, cumulative production increased by 478,200 mt YoY, an increase of 5.64%.

The main reasons for the unexpected decline in September production are as follows: 1. A major smelter in central China required long-term maintenance due to force majeure, significantly reducing its output; 2. Continued tight supply of blister copper and copper anode led to decreased production at some smelters, as reflected in the continued decline in processing fees for blister copper and copper anode (as of September 27, SMM reported south China domestic blister copper RCs at 800 yuan/mt, down 100 yuan/mt from the previous month; domestic copper anode processing fees at 400 yuan/mt, down 100 yuan/mt from the previous month).

In summary, the sample operating rate of the copper cathode industry in September was 82.6%, down 0.42 percentage points MoM. The operating rate for large smelters was 84.74%, down 0.56 percentage points MoM; for medium smelters, it was 80.60%, down 2.83 percentage points MoM; for small smelters, it was 67.78%, up 5.48 percentage points MoM. The operating rate for smelters using copper concentrate was 86.0%, down 0.3 percentage points MoM; for those not using copper concentrate (using copper scrap or copper anode instead), it was 62.70%, down 2.6 percentage points MoM.

Entering October, according to SMM statistics, five smelters are scheduled for maintenance, involving blister copper capacity of 1.04 million mt, a significant increase from 500,000 mt in September. Additionally, due to tight copper concentrate supply, the ramp-up speed of some newly commissioned smelters has slowed. Coupled with the continued tight supply of blister copper and copper anode, production at some smelters relying on them continues to decline. Under the influence of many unfavourable factors, production in October is expected to continue to decrease.

Based on production schedules, SMM expects October domestic copper cathode production to decrease by 1.08 percentage points MoM and by 0.03 percentage points YoY. From January to October, cumulative production increased by 5.04% YoY, an increase of 477,900 mt. The sample operating rate of the copper cathode industry in October is expected to be 81.53%, down 1.06 percentage points MoM. The operating rate for large smelters is expected to be 83.42%, down 1.32 percentage points MoM; for medium smelters, 78.46%, down 2.14 percentage points MoM; for small smelters, 72.22%, up 4.44 percentage points MoM. The operating rate for smelters using copper concentrate is expected to be 85.1%, down 0.9 percentage points MoM; for those not using copper concentrate (using copper scrap or copper anode instead), it is expected to be 62.50%, down 0.2 percentage points MoM, marking a continuous decline for four months, with further decline expected in the future. Finally, the number of smelters planning maintenance in November will increase to eight, and SMM expects production to continue to decline in November, with production expected to increase again in December as maintenance concludes.

Aluminum

According to SMM statistics, as of October 9, 2024, domestic aluminum production in September (30 days) was up 1.45% YoY. The capacity in Sichuan and Guizhou, which had previously halted for technical upgrades, gradually resumed production, leading to a steady increase in domestic aluminum operating capacity.

During the September-October peak season, the production and demand for downstream alloy products rebounded, driving the proportion of liquid aluminum up by 0.7 percentage points MoM and 0.6 percentage points YoY to approximately 73.76%. According to SMM's liquid aluminum proportion data, the casting ingot production in September decreased by 0.67% YoY to around 937,900 mt.

Capacity changes: By the end of September, SMM statistics showed that the existing capacity of domestic aluminum was about 45.36 million mt, with an operating capacity of approximately 4,351 mt, and the industry's operating rate increased by 0.94 percentage points YoY to 95.96%. In the month, the capacity in Sichuan and Guizhou, previously halted for technical upgrades, gradually started production, with output expected to reflect in October and November.

Production forecast: Entering October 2024, domestic aluminum operating capacity is expected to slightly increase, mainly due to the continued resumption of upgraded capacity in Sichuan and Guizhou, and the initiation of replacement projects in Xinjiang. Additionally, this year, Yunnan's power supply is relatively sufficient, reducing the expected production cuts. SMM expects the annualized operating capacity of domestic aluminum to reach 43.63 million mt/year by the end of October. As October marks the end of the peak season, and with the impact of environmental protection policies in north China affecting local production, combined with aluminum prices fluctuating at highs, some end-use sectors are adopting a wait-and-see approach, which may negatively impact the demand for aluminum billets and other alloy products. It is expected that the proportion of liquid aluminum will adjust to around 73% in October. Continued attention is needed on the resumption of aluminum production in various regions and the operating conditions of downstream sectors like aluminum billets.

Alumina

According to SMM data, in September 2024 (30 days), China's metallurgical-grade alumina production decreased by 4.27% MoM, up 2.69% YoY. As of October 10, China's existing metallurgical-grade alumina capacity increased by 1 million mt MoM, with actual operating capacity down 1.30% MoM, and an operating rate of 82.71%. From January to September 2024, domestic metallurgical-grade alumina cumulative production increased by 3.66% YoY.

By region:

Shanxi: The operating rate in September was 76.1%, down 2.01% from August, mainly due to tight ore supply and some capacity still under suspension for technical upgrades.

Henan: The operating rate in September was 61.6%, down 2.35% from August, mainly due to maintenance of some alumina refinery production lines in early September and some companies unable to increase production due to ore supply issues, resulting in a slight decline in the operating rate.

Guizhou: The operating rate in September was 84.0%, up 6.61% from August.

Hebei: The operating rate in September was 91.3%, down 12.06% from August, mainly due to overproduction after maintenance recovery in August and maintenance in early to mid-September, leading to a decline in production.

Guangxi: The operating rate in September was 92.1%, up 2.71% from August, mainly due to a local alumina refinery ramping up to full production mid-month.

Shandong: The operating rate in September was 90.3%, down 5.40% from August, mainly due to maintenance at some local alumina refineries, leading to a decline in production. Additionally, a new 1 million mt production line was completed at a local alumina refinery, with no contribution to September's production as it started in early October.

October forecast: The SMM survey indicates that despite plans for production reduction and technical upgrades in other regions, new capacity at a Shandong alumina refinery will start, and maintenance at a Hebei and a Guangxi alumina refinery will end, returning to normal production. It is expected that the daily average alumina production in China will slightly increase in October. On the raw material side, there is no further news on the resumption of domestic ore production, and supply remains tight. Import ore supply is expected to decrease due to the rainy season in Guinea, indicating a tight supply of bauxite, which continues to limit the increase in alumina operating capacity. SMM expects China's daily average metallurgical-grade alumina production to increase by 1.73% MoM in October 2024. Continued attention is needed on potential alumina demand brought by aluminum resumption in south-west China and the pace of new alumina capacity release.

Overseas Aluminum

According to SMM statistics, in September 2024 (30 days), the total overseas aluminum production slightly decreased by 0.1% YoY. As of September 2024, cumulative overseas aluminum production increased by 1.1% YoY. The average overseas operating rate was 88%, down 0.2% MoM, up 0.7% YoY.

By region:

North America: September total production decreased by 3.9% YoY, with an average operating rate of 83.1%. The New Madrid aluminum smelter in the US announced a shutdown at the beginning of 2024, reducing annual aluminum production by about 147,000 mt; however, Alcoa's Warrick aluminum smelter announced the restart of a 54,000 mt production line early last year, with the current operating rate at about 75%.

South America: September total production increased by 5.0% YoY, with an average operating rate of 67.7%. The increase was due to the restart of the Alumar plant. Alcoa holds a 60% stake, and South 32 holds 40%. It announced a restart in April 2022, with the operating rate recovering to about 70% in September.

Russia: September total production increased by 2.9% YoY, with an average operating rate of 95.3%. The increase came from the restart of the Taishet aluminum smelter. The plant announced a restart in early 2022, but progress was slow. In September, the total production was about 21,000 mt, with the operating rate recovering to about 64%.

Europe (excluding Russia): September total production increased by 2.9% YoY, with an average operating rate of 73.8%. The increase mainly came from the restart of Trimet's three plants in Germany. Trimet announced a restart in April 2024, expected to reach full production by mid-2025. According to SMM estimates, the operating rate of the three plants recovered to about 63% in September.

Africa: September total production increased by 2.7% YoY, with an average operating rate of about 84.9%.

Oceania: September total production decreased by 5.5% YoY, with an average operating rate of about 84.5%, down 0.2% MoM, down 4.7% YoY. The main reason was the Tiwai Point aluminum smelter in New Zealand reducing power consumption by a total of 205 MW in July and August to alleviate the energy crisis of the New Zealand State Grid. Currently, Tiwai Point's annual capacity is about 345,000 mt, and the two power reductions are expected to reduce aluminum production by about 125,000 mt.

Middle East: September total production slightly decreased by 1.5% YoY, with an average operating rate of 102.2%.

India: September total production was about 348,000 mt, up 0.7% YoY. The average operating rate was 100.2%.

Other Asian regions excluding China, India, and the Middle East: September total production decreased by 1.7% MoM, with an average operating rate of 76.3%, down 3.8 MoM. The decrease was due to an explosion at Press Metal's Samalaju plant in September, affecting about 9% of total aluminum capacity, specifically 100 out of 300 electrolytic cells in the plant's third phase. This incident is expected to reduce Press Metal's annual aluminum production in 2024 by about 3%. The repair of the damaged facilities is expected to take about four months, after which production will gradually recover.

October forecast: According to SMM statistics, in October 2024 (31 days), overseas aluminum production is expected to remain flat YoY, with an average overseas operating rate of 88%, down 0.2% MoM, up 0.7% YoY.

Overseas Metallurgical Grade Alumina

In September 2024 (30 days), overseas metallurgical grade alumina production decreased by 2.7% YoY. The average operating rate of overseas alumina refineries was 78.9%, slightly up 0.1% MoM, but down 3.8% YoY. From January to September 2024, cumulative production decreased by 0.1% YoY.

By region:

Australia: Production for the month decreased by 11.5% YoY, with an average operating rate of about 78%. Alcoa's Kwinana alumina refinery was completely shut down by the end of Q2. Due to a natural gas pipeline explosion, Rio Tinto's Gladstone operations, Yarwun and QAL, reduced production to 74% and 77%, respectively. Rio Tinto stated that the cuts are expected to continue until the end of the year, and the annual production guidance was lowered by about 600,000 mt. Additionally, due to delays in environmental protection approvals and conveyor belt maintenance, South32's Worsley alumina refinery was forced to cut production, and the company lowered its FY25 (2024.7.1-2025.6.30) alumina production guidance by 6% to 3.75 million mt.