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Shares of Chinese aluminium producers and other non-ferrous metal companies stage a strong rally driven by the production cut in Europe amid the deepening energy crisis. An Index tracking Chinese aluminium makers compiled by Wind Information is surging 3.7% as of 1:49 pm local time, making it one of the best-performing sectors in the A-share market, compared to 0.06% loss for the benchmark Shanghai Composite Index.
Tianshan Aluminium, Yunnan Aluminium, Jiaozuo Wangfang Aluminium Manufacturing are surging by the daily limit of 10%, Shandong Nanshan Aluminium up 8.3% and Aluminium Corporation of China jumping 8.3%.
Europe’s metal smelting industry has been cutting or suspending production after Russia’s move to halt natural gas supply to Germany in a major pipeline sent energy prices soaring. Aluminium production cut in Europe and the US in the period of Oct 2021 – Aug 2022 reached about 1.3 million tonnes a year, including 1.04 million tonnes in Europe and 250,000 tonnes in the US., according to commodity consultancy Mysteel.
Hydro’s Slovalco aluminium facility in Slovakia said in August that it would stop all primary aluminium production by the end of September 2022. Due to the current Slovak framework conditions and the European power prices, Slovalco would incur substantial financial losses if it continued its operation beyond 2022,” it said at the time.
Cinda Securities said in a note that the energy crisis in Europe will curb metal supply and extend the time of elevated metal prices. CSC Financial said in a note that Europe could see energy and power prices surge further due to Europe’s heavy reliance on traditional energy supply in power generation and the sharply higher cost could lead to more production cut in metal smelting industry.
