An international coalition of aluminium trade associations has called for a global forum to be created ahead of the G20 meeting in Hamburg this summer to tackle China’s soaring output.
Russian companies, hit particularly hard by Chinese production, are also backing the initiative by trade groups from the US, Europe and Canada, which represent companies including Rio Tinto and Alcoa.
“This situation not only significantly distorts international trade flows affecting all of our countries but also undermines global stability,” the three trade associations said in a letter to G20 leaders.
China is the world’s largest producer of aluminium but, for the first time, has committed this year to cut capacity in its northern areas to reduce air pollution. The pledge has offered hope that the government might enact measures similar to those that have helped to reduce steel and coal capacity.
Despite a tentative recovery in prices following a five-year slump, experts warn that China’s pledge has not yet reduced net capacity.
“While the central government has acknowledged that overcapacity is a problem and they have announced plans to address it, to date we have not seen any movement,” Charles Johnson, vice-president of policy at the US Aluminum Association, said. “Overcapacity continues to increase and any announced planned closures have been surpassed by new openings.”
At last year’s G20 summit in Hangzhou, President Xi Jinping promised to cut China’s steel output over the next five years.
A document released by China’s Mininstry of Environment Protection and other local governments called last month for 28 northern cities to reduce aluminium capacity by 30 per cent in the winter months. The regions account for around 20 per cent of global aluminium capacity, according to analysts at Goldman Sachs.
Aluminium prices have risen 11 per cent this year to $1,916.5 a tonne, after touching their lowest levels since 2009 in late 2015.
Mr Johnson said he expected President Trump’s administration to take the issue as seriously as Barack Obama. Before he left office Mr Obama’s administration filed a case at the World Trade Organisation that challenged how Beijing’s financial sector subsidises its aluminium industry.
Russia’s desperation to find a solution was underlined last month when the country’s minister for industry and trade told reporters that Moscow was planning to propose a cartel of aluminium producers similar to oil’s Opec. Industry and government officials later said the minister was speaking on his own behalf.
“We have big concerns over the mounting overcapacity problem. There is support for this move and hope a global forum will find ways address the overcapacity issue,” a person with knowledge of the Russian Aluminium Association’s stance said.
In 2001, Russia accounted for around 10 per cent of global aluminium production, slightly less than China. Last year, it produced just 6 per cent of the global total, as China’s share soared to more than 50 per cent.
Rusal, the country’s largest producer, was overtaken as the world’s number one by China’s Hongqiao, after being forced to close down smelters because of the fall in the global aluminium price, blamed on Chinese overproduction.
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