China’s Aluminium Consumption Growth Expected to Slow Amid Economic Uncertainty

China's aluminium consumption growth is expected to slow to slightly below 5% this year, compared to a 6% gain in 2023, as demand cooled during the third quarter amid economic challenges, despite robust growth from the energy and transportation sectors, local analysts reported to MNI.

Gu Fengda, chief nonferrous metals analyst at Guoxin Futures, noted that increasing power infrastructure construction and policies encouraging the replacement of outdated materials in the transportation sector will help sustain aluminium demand at around 43 million tonnes this year. In August, the transportation sector accounted for 20.1% of aluminium consumption, surpassing the housing sector's 18.4%. Demand from the electricity and packaging sectors grew by 18.8% and 7.7%, respectively, during the first eight months of the year.

Looking ahead to the fourth quarter, Gu highlighted that further stimulus announcements and export performance would be key to maintaining demand. He also expects China's aluminium consumption growth in 2024 to remain slightly below 5%, as demand continued to cool in the third quarter of this year.

The Ministry of Finance recently signaled potential support for the real estate market and local government debt, with officials indicating substantial room for additional borrowing and an increased deficit-to-GDP ratio. Authorities are expected to announce further fiscal measures after the next Standing Committee meeting.

Aluminium prices on the Shanghai Futures Exchange are projected to rise in the fourth quarter, particularly during the October-November peak season, with resistance expected at around CNY 22,000 per tonne and support near CNY 18,500, according to Gu. However, an unexpected decline in precipitation in Yunnan, a major aluminium-producing province relying on hydropower, could lead to production cuts and tighter supply.

Chen Xinlin, an aluminium consultant at Wood Mackenzie, estimated that strong growth in energy transition sectors such as solar panels will drive approximately 3% year-on-year growth in China's aluminium consumption in 2024. Domestic primary aluminium output is also expected to rise to 42.8 million tonnes, up from 41.6 million tonnes in 2023, due to higher smelter utilization, Chen added.

Plant resumptions in Guizhou and Sichuan, coupled with expectations of fewer production curbs in Yunnan following heavy summer rainfall, will likely maintain strong year-on-year output growth in the fourth quarter, Gu argued. Data from the National Bureau of Statistics showed that primary aluminium production reached 28.9 million tonnes between January and August 2024, representing a 5.1% year-on-year increase.

China's aluminium imports are anticipated to reach 3 million tonnes in 2024, driven by favorable pricing conditions abroad, with increased shipments from Russia. Bauxite imports also rose as authorities intensified inspections at domestic mines, resulting in shortages. Between January and August, China imported 1.5 million tonnes of primary aluminium, an increase of 123.3% year-on-year, following a 130.8% rise in 2023.

Gu also pointed to strong growth in the automotive and aerospace industries, which use high-end aluminium not readily available domestically, contributing to increased imports. "Russian imports could rise further if the U.S. and EU enforce additional sanctions against Moscow," Gu added.