On December 10, 2015, 14 attending enterprises, whose electrolytic aluminum production capacity accounted for 75 percent of the whole country, committed on the symposium of backbone of electrolytic aluminum enterprises held by China Nonferrous Metals Industry association (CNMIA) that no longer restart the production capacity that has been shut down and further increase the flexible production scale, and at the same time, they promised not putting the completed capacity into operation for at least 1 year. Since last year, to reduce inventory, electrolytic aluminum enterprises have conducted flexible production. According to statistics of CNMIA, reduced scale of production in electrolytic aluminum industry has reached 5 million tons in 2015, more than 12 percent of the total capacity.
At the beginning of 2015, Aluminum Corporation of China (CHINALCO) set up in Beijing headquarter its lightweight promotion office to set out the special research on the lightweight of transportation industry like automobile and ship. CHINALCO is also actively cooperating with Chinese Academy of Engineering and downstream auto companies to establish a "national engineering center of non-ferrous metals application in automobile lightweight" and promote lightweight of China's material industry and the leapfrog development of "replacing steel with aluminum". According to MIIT, as a result of the unceasingly expanding of aluminum product application scope, China's utilization of electrolytic aluminum production capacity has been restored to more than 80 percent by the end of last year.
By working along the two lines of flexible production and expanding consumption, electrolytic aluminum industry has gotten the way to dissolve excess production capacity and realize industry upgrading and development.
Flexible production on the road
Since 2012, because of excess production capacity, China's aluminum smelting industry has been experiencing losses for three consecutive years, and the percentage of loss-incurring enterprises continue to expand. In November 2015, the lowest price of three-month aluminum prices in Shanghai Futures Exchange fell to RMB 9620 yuan/ton, hitting a low in 20 years. An analyst of CNMIA said that presently the average tax-included cost of electrolytic aluminum industry is about RMB 12000 yuan/ton, higher than the current aluminum prices. In Sichuan, Gansu, Qinghai and other regions, the loss of production 1 ton of electrolytic aluminum is more than RMB 3500 yuan in average; Even in Shandong, whose cost is the lowest, the loss is close to RMB 1000 yuan per ton in average.
Under this background, to break through and turn around, the electrolytic aluminum industry on the side of supply has only to contract its production capacity, compress the high cost, high pollution capacities by means of marketization and administration, and improve its economic benefits through the merger and reorganization. As a result, electrolytic aluminum stepped towards flexible production after the copper, zinc and nickel industries.
In order to reduce losses, many electrolytic aluminum enterprises have taken decisively the flexible production measure to save its life, including shutting down all or part of the tanks, reducing production, overhauling electrolytic tanks earlier, delaying the reproduction of overhauled tanks, and eliminating inefficient capacity earlier. According to statistics from Antaike, by the end of 2015, closed or shut production capacities of electrolytic aluminum have accumulated to 3.5 million tons/year, with the third quarter reducing capacity accounting for 42 percent and the fourth quarter 37 percent.
The effect of production reducing has revealed. Data released by CNMIA show that in October 2015 the national average daily output has dropped 5000 tons month-on-month, or 5600 tons compared with the highest output in June. Production reducing has alleviated the pressure of supply to a certain extent. Data show that since the second half of 2015, aluminum stocks have been falling continuously to 800,000 tons in early December from 1 million tons in October of last year.
At the same time of the enterprise replying the pressure collectively, the association actively provides the guidance as well. CNMIA advises enterprises to save themselves by developing practical flexible production measures combining their own actual situations. Furthermore, CNMIA also actively makes recommendations to the relevant government departments to help enterprises out of trouble, including advice to startup the mechanism of purchase and storage, speed up formulating the supporting measures to guidance production capacities lack of competitiveness to exit, etc.
Wen Xianjun, vice president of CNMIA, said that in the current situation, it is necessary and feasible that the enterprises conduct flexible production. The flexible production will lead the price of aluminum back to the right direction and enable the industry to recuperate and get onto a healthier and sustainable development road.
Huge potential of "aluminum lightweighting"
To really make the electrolytic aluminum industry to get rid of the trouble of excess capacity, work should be done on the both sides of consumption and supply at the same time. The expansion of the aluminum application and consumption is an important way. Aluminum and its alloy material have a series of excellent properties and are the ideal of "green" materials to realize the lightweighting. They can be widely used in transportation, construction, electricity, packaging, machinery and equipment, marine engineering, electronic information, household appliances and consumer durables with promising prospects. Wen Cianjun introduced that at present, China's aluminum using quantity was only equal to one-tenth of that in US, even lower when per capita stock was considered. Compared with the developed countries, China has very big development space both in the breadth and depth of aluminum application.
Taking aluminum used in transportation as an example, domestic and foreign research shows that every 10 percent light of car weight can reduce 8 to 10 percent of fuel consumption. A 1000 kilograms lightweighting of 16 tons to 20 tons load vehicle can reduce 6 to 7 percent of fuel consumption. Replacing steel with aluminum alloy is the main measure of light weighting of the global transportation industries and is the key direction of the transportation industry in China in the future. It is imperative to lightweight with aluminum instead of steel. At present, the aluminum using amount in the car in developed countries has reached 145 kg in average, while that in China is only 105 kg, showing a huge market space.
During "12th Five-year Plan" period, the annual compound growth rate of aluminum consumption in China automobile manufacturing industry was 20.9 percent, and the application of aluminum alloy profile, strip, castings and forgings on automobiles was continuously increased. Research shows that in the next 10 years, the demand on aluminum plate of the global market used for automobile will increase dramatically with the annual growth rate reaching 30 percent. While in China, the market will see a 10 million tons aluminum increase totally in fields of passenger car, whole aluminum trailer, aluminum oil tank truck, C80 coal gondola car and high-speed railway. The progress of projects including "big plane", ship and yacht will bring greater development opportunities for aluminum industry as well.
Wen Xianjun said that the huge space of consumption growth in traditional fields and the continuously emerging of new applications will constantly improve China's aluminum consumption's quantity and quality. He expected that raw aluminum consumption this year will grow by 7.2 percent and by the end of "13th Five-year Plan" period, the consumption of aluminum in China will reach it peak of 44 million tons/year and maintain for a long time at the peak.