LONDON – Aluminum touched a new six-year low of $1,479 per tonne in London last week.
It’s now trading at levels close to those seen during the depths of the Global Financial Crisis, when the London Metal Exchange (LME) three-month price fell briefly as far as $1,279 in February 2009.
And if you think that’s bad, the situation in China is even worse. The front-month contract on the Shanghai Futures Exchange (SHFE) closed Friday at 10,580 yuan per tonne, within spitting distance of the December 2008 trough of 10,040 yuan.
Basis the most liquid SHFE contract though, the price has already fallen far further than the 2008-2009 low of 13,665 yuan. At such depressed price levels, around 90 percent of China’s huge aluminum smelter sector is operating at a loss, according to consultancy AZ China.
However, Chinese production is still rising. September’s annualized run rate was a new record at 33 million tonnes.
The country continues to pump its surplus out to the rest of the world, depressing prices and pushing more smelters elsewhere to the brink of closure.
This is shaping up to be a Darwinian battle for survival with increasingly geopolitical overtones as the U.S. industry leads the fight-back against Chinese exports.
TO CLOSE OR NOT TO CLOSE?
China has some of the most modern and lowest-cost smelters in the world, most of them located in northwest provinces such as Xinjiang.
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