The Chinese aluminium industry is in the process of shifting its production base to Western China where it will benefit from abundant coal resources and this, combined with a depressed global macroencomic situation, means that prices will remain weak.

Shifting aluminium production to western China is due to a power crisis in China's central and eastern regions in 2009/2010.

In the Xinjiang Uygur Autonomous Region of western China, a total of 10 large aluminium companies have invested in projects with a planned capacity of more than 15Mt. By the end of June 2013, actual aluminum capacity in Xinjiang reached about 3.3Mt, of which 1.5Mt was created within the year.

With more capacity coming on stream in western China, the big headache will be raw materials, especially now that
Indonesia is planning to restrict (or even ban) exports of bauxite..

As new low-cost capacity in China comes on stream, it will exacerbate excess capacity issues globally, according to analysts, who also believe that a strong US economy in the second half of 2013 will do little to boost demand for aluminium.

Source: China Metals.