China’s June Aluminium Output Hits Decade High, H1 Production Up 7%

China's primary aluminium production reached its highest level in nearly a decade in June, with output in the first half of 2024 growing by 7% as producers ramped up operations amid higher profits. According to the National Bureau of Statistics (NBS), the world's largest aluminium producer churned out 3.67 million metric tons of primary aluminium in June, marking a 6.2% year-on-year increase and the highest single-month production since Reuters' records began in November 2014.

The increase in June's production was driven by the addition of new capacity in Inner Mongolia and the resumption of production in Yunnan, thanks to sufficient hydropower supply during the summer rainy season, as reported by Shanghai Metals Market. This brought total production in the first half of the year to 21.55 million tons, a 6.9% rise compared to the same period last year.

The surge in aluminium prices, as investors maintained an optimistic outlook on demand for the light metal, along with funds flowing into the base metals sector, fueled this production boost. In late May, the most-traded aluminium contract on the Shanghai Futures Exchange (SHFE) reached a two-year peak of over 22,000 yuan ($3,030.39) per ton, up 15% from the start of the year. The contract currently hovers around 20,000 yuan per ton.

The aluminium industry's profit margins also improved significantly due to the price surge and lower electricity costs. Research house Antaike reported that the average profit margin more than doubled to 2,818 yuan per ton in the first half of this year, compared to 1,211 yuan per ton a year earlier.

Despite the increase in production, subdued demand due to a prolonged property crisis and rising prices has led to an inventory build-up in China. Aluminium, primarily used in construction, transportation, and packaging, has seen deliverable stocks in SHFE warehouses reach a 15-month high last Friday.

Analysts expect smelters to maintain high production levels in the second half of the year, forecasting a 3% rise in 2024 output compared to last year's 41.59 million tons.

Production of ten nonferrous metals, including copper, aluminium, lead, zinc, and nickel, rose by 7.5% year-on-year to 6.61 million tons in June. Year-to-date output of these metals increased by 7.1% to 39 million tons. The other non-ferrous metals in this group are tin, antimony, mercury, magnesium, and titanium.