Bottlenecks in the supply of bauxite and alumina will be a key issue for the aluminum industry, and in particular for China, in the coming months, Norsk Hydro ASA's (NHY.OS) chief executive said Wednesday.
"Bauxite and alumina will be the first place in the value chain that we'll see bottlenecks going forward, and that will be driven by the desire for imports of bauxite into China," said Sven Richard Brandtzaeg.
"The major problem for China, in addition to the fact it needs access to cheap energy, is a lack of raw material supplies like bauxite to cover its needs, so the country is more and more dependent on bauxite imports," he said. "But Indonesia, a key supplier of bauxite, now wants to develop its resources and add value domestically instead of exporting them, so there are signals of limits on the export of Indonesian bauxite to China in the longer term."
Brandtzaeg said Chinese demand has slowed as part of the country's efforts to rein in its exponential growth, but that it will by no means vanish.
"The overall policy in China is to reduce dependence on exports and investments and try to develop domestic consumption, so a higher percentage of gross domestic product is linked to consumption. That is a change that will have an impact on the aluminum industry as we see it today," he said.
But while smelters aren't struggling to get lines of credit despite the economic uncertainty and tightening of lending regulations, Brandtzaeg said he has reservations over the likely negative impact of the policy on the downstream aluminum industry in China along with entrepreneurs.
Chinese aluminum smelters are struggling with the high cost of production in the east so more capacity is moving to the country's west, where there are stranded coal resources, Brandtzaeg said.
"The policy in China remains to develop the aluminum industry but Chinese smelters now account for around 7% of the country's total demand for energy, which means it will be challenging for China to produce aluminum as it is growing its demand," he said.
Brandtzaeg said China is likely to reduce the value-added-tax rebate for exports of semi-fabricated products, a move widely mooted by industry participants. The rebate is currently 13% and may go to 9%, traders say.
"China's fiscal policy has promoted the development of the domestic industry in a constructive way," he said. "Value creation in China is one of the main targets and it will certainly target exports of finished products rather than semis, so I would expect fiscal policy would be set according to that."
豫公网安备41010502003434号