Source: China Economic Times Reporter: Zhang Yi-Min

The halt of high-speed rail network projects directly hit the domestic aluminum market as evidenced by the fall of production and export volume. The suspension of rail network projects has led to a drastic decrease in orders of aluminum strips for the use of rail networks. Coupled with some areas limiting their electricity use, the aluminum output in China may fall below two million tonnes in mid-August and thus will decrease export volume, said Guo Fang, Analyst from Chem99.

As shown by the figures from Non-Ferrous Metal Society of China, aluminum output in July amounted to 2.0115 million tonnes, a decrease of 8.8% over that of previous month.

The Ministry of Finance is brewing down part of the export tax rebate. Tax rebate rate of some aluminum extrusions will adjust from the current rate of 13% to 9%, increasing the adverse effects on middle to low-ended aluminum companies.

Having experienced the countervailing and anti-dumping measures in countries such as Canada, Australia and the U.S., the China’s aluminum extrusion export industry finds itself struggling. “4% of the export tax rebate rate cut means that we will increase 170 yuan / ton export costs, thereby decreasing product competitiveness." An executive from a middle-to-low-ended aluminum company spoke on the condition of anonymity.

Corporations with a focus on high ended products and domestic markets fare a little better. Lu Changqing, China Zhongwang’s Executive Director and Vice-President said, “the turnover and domestic sales for the 2011 2nd quarter has been increased by 87% and 94% respectively over that of 1st quarter as we signed servicing agreements with a number of Chinese corporations. To minimize the negative impacts from the U.S. countervailing and antidumping measures on partial aluminum extrusions, we have optimized capacity by expanding large machines, increasing domestic market share and also the proportion of high ended products.”

Faced with the soaring prices of coal, electricity and electrolytic aluminum, a number of aluminum companies have adopted measures as those of Zhongwang with a view to adjusting product structures. Some aluminum extrusion companies have been switching from aluminum extrusion processing to further fabrication in order to upgrade the lower stream of product chains and move closer to finished products.