LONDON (Reuters) – China’s aluminium smelters lifted production by 2.4% over the first two months of this year. The increase was testament to producers’ ability to keep operating over the worst of the coronavirus outbreak in China.
Unfortunately, the same cannot be said of the country’s aluminium processing sector, which transforms raw metal into semi-manufactured products (“semis”) and which is only now limping back to normality.
The disconnect is becoming evident in surging stocks held in Shanghai Futures Exchange (ShFE) warehouses. With end-use demand collapsed in key sectors such as automotive, the dissonance with rising smelter production becomes ever more striking.
Where China is today, the rest of the world will be tomorrow as the virus spreads. The global aluminium industry has a terrible record of responding to demand shocks. It is still living with some of the inventory accumulated in the wake of the Global Financial Crisis a decade ago.
Will this time be any different? The early-year figures from China don’t offer much cause for optimism. ShFE stocks have mushroomed from 185,127 tonnes at the end of December to 519,542 tonnes.