The NDRC's recently announced 2005 economic operation in the previous quarter showed that the actual aluminum loss in China's electrolytic aluminum industry is as high as 80%, and the entire industry is already at the edge of overall losses (Beijing News, April 27). The rapid deterioration of the industry's development situation has not been expected by many investors, because last year, the electrolytic aluminum industry's investment growth rate was as high as 89.2%. So where does the problem originate?
The reason given by the National Development and Reform Commission is that the blind construction of the electrolytic aluminum industry in previous years led to a low level of expansion, which in turn caused
The overall profitability of the industry has declined. This is indeed understandable, but the problem is that in recent years, the investment growth of the steel industry is even higher than that of the electrolytic aluminum industry. However, the steel industry has not incurred such a wide range of losses. This allows us to analyze the characteristics of the electrolytic aluminum industry itself.
The author believes that the reasons leading to large-scale losses in the electrolytic aluminum industry in the first quarter are mainly due to the following points.
First of all, the price of international mineral products market soared this year, leading to an increase in the cost of raw materials for the electrolytic aluminum industry in China. As one of the more important raw materials for electrolytic aluminum production, the output of alumina in China is far from meeting the strong demand of the electrolytic aluminum industry, and about 45% of alumina needs to be imported from abroad. At present, China's imported alumina has accounted for more than 60% of the world's total spot trade, which means that China's demand pull is crucial to the price decision of the international alumina market. Consultation, survey, and investigation are still buzzing with 5.1%. The resulting increase in the price of the international alumina market has pushed up the cost of raw materials for unit electrolytic aluminum, which has reduced the profitability of the industry.
Second, the electrolytic aluminum industry is a high-energy-consuming industry, and thus the level of electricity prices has a significant impact on the unit cost of electrolytic aluminum. It is estimated that electricity costs account for approximately 30% to 40% of the cost of electrolytic aluminum, so for every one cent increase in electricity price, the profit for producing 1 million tons of electrolytic aluminum will decrease by 150 million yuan.
After the country cancelled the preferential electricity price in 2004, the price of electricity increased from the previous 0.29 yuan to the current 0.34 yuan, and only this item caused the cost of tons of aluminum to increase by 750 yuan. In view of the fact that the current tight situation in China's coal, electricity, and oil transportation has not been completely alleviated, we expect that the electricity price may continue to increase. The increase in electricity prices will further reduce the profitability of electrolytic aluminum producers.
Third, in the macro-control of electrolytic aluminum industry, the change of taxation policy has brought a significant negative impact on the industry. Since January 2005, the 8% export tax rebate for aluminum products has been cancelled, and an import tariff of 5% has been imposed on the export of aluminum products. This has greatly increased the export cost of China's electrolytic aluminum enterprises. It is estimated that the export cost per ton of electrolytic aluminum will increase by about 1,685 yuan, and the total cost per ton of aluminum will reach the interval of 1,650-17,000 yuan. From the trend of aluminum prices in 2004, although the fluctuation range is relatively large, the average price is stable at around 16,200 yuan per ton.
This means that China's electrolytic aluminum export profits have been negative after tax adjustments. Coupled with the current rumors about raising the export tariff of electrolytic aluminum from 5% to 20%, the future fate of the electrolytic aluminum industry in China may be that there is no export profit.
Fourth, the industrial structure of the electrolytic aluminum industry in China is obviously unreasonable. As of the end of 2004, there were 119 electrolytic aluminum enterprises in operation and operating conditions in China, including 23 aluminum plants with output of over 100,000 tons, accounting for 56.7% of the national output. The number of electrolytic aluminum enterprises in China exceeds the sum of electrolytic aluminum plants in other countries in the world, but the average size of enterprises is only one fourth of the world average. Due to the failure to make full use of economies of scale, China's electrolytic aluminum industry has a low international competitiveness. Therefore, only under the preferential policies of low electricity prices and export tax rebates can export prices be competitive. The blind and disorderly expansion of electrolytic aluminum production capacity in this round of economic overheating has further distorted the rational distribution of the industry, increased the difficulty of structural adjustment, and constrained industrial upgrading and overall profitability enhancement.
So how should we respond? For electrolytic aluminum companies, the realistic choice is to increase the utilization rate of existing production capacity, reduce the power consumption of aluminum products per unit through technological innovations, and fix the price of alumina by entering into long-term contracts with international alumina exporters. For the industry and the government, it is necessary to strengthen macro-control efforts to avoid further blind construction and low-level expansion of the industry, promote mergers and acquisitions among enterprises to optimize the industrial structure and give full play to the scale effect. If the electrolytic aluminum industry is unable to reverse its decline in the short term after it has fallen into full loss, then the government should consider giving certain preferential policies to promote the industry's reasonable growth under the premise of intensive production and increasing industrial concentration.
The reason given by the National Development and Reform Commission is that the blind construction of the electrolytic aluminum industry in previous years led to a low level of expansion, which in turn caused
The overall profitability of the industry has declined. This is indeed understandable, but the problem is that in recent years, the investment growth of the steel industry is even higher than that of the electrolytic aluminum industry. However, the steel industry has not incurred such a wide range of losses. This allows us to analyze the characteristics of the electrolytic aluminum industry itself.
The author believes that the reasons leading to large-scale losses in the electrolytic aluminum industry in the first quarter are mainly due to the following points.
First of all, the price of international mineral products market soared this year, leading to an increase in the cost of raw materials for the electrolytic aluminum industry in China. As one of the more important raw materials for electrolytic aluminum production, the output of alumina in China is far from meeting the strong demand of the electrolytic aluminum industry, and about 45% of alumina needs to be imported from abroad. At present, China's imported alumina has accounted for more than 60% of the world's total spot trade, which means that China's demand pull is crucial to the price decision of the international alumina market. Consultation, survey, and investigation are still buzzing with 5.1%. The resulting increase in the price of the international alumina market has pushed up the cost of raw materials for unit electrolytic aluminum, which has reduced the profitability of the industry.
Second, the electrolytic aluminum industry is a high-energy-consuming industry, and thus the level of electricity prices has a significant impact on the unit cost of electrolytic aluminum. It is estimated that electricity costs account for approximately 30% to 40% of the cost of electrolytic aluminum, so for every one cent increase in electricity price, the profit for producing 1 million tons of electrolytic aluminum will decrease by 150 million yuan.
After the country cancelled the preferential electricity price in 2004, the price of electricity increased from the previous 0.29 yuan to the current 0.34 yuan, and only this item caused the cost of tons of aluminum to increase by 750 yuan. In view of the fact that the current tight situation in China's coal, electricity, and oil transportation has not been completely alleviated, we expect that the electricity price may continue to increase. The increase in electricity prices will further reduce the profitability of electrolytic aluminum producers.
Third, in the macro-control of electrolytic aluminum industry, the change of taxation policy has brought a significant negative impact on the industry. Since January 2005, the 8% export tax rebate for aluminum products has been cancelled, and an import tariff of 5% has been imposed on the export of aluminum products. This has greatly increased the export cost of China's electrolytic aluminum enterprises. It is estimated that the export cost per ton of electrolytic aluminum will increase by about 1,685 yuan, and the total cost per ton of aluminum will reach the interval of 1,650-17,000 yuan. From the trend of aluminum prices in 2004, although the fluctuation range is relatively large, the average price is stable at around 16,200 yuan per ton.
This means that China's electrolytic aluminum export profits have been negative after tax adjustments. Coupled with the current rumors about raising the export tariff of electrolytic aluminum from 5% to 20%, the future fate of the electrolytic aluminum industry in China may be that there is no export profit.
Fourth, the industrial structure of the electrolytic aluminum industry in China is obviously unreasonable. As of the end of 2004, there were 119 electrolytic aluminum enterprises in operation and operating conditions in China, including 23 aluminum plants with output of over 100,000 tons, accounting for 56.7% of the national output. The number of electrolytic aluminum enterprises in China exceeds the sum of electrolytic aluminum plants in other countries in the world, but the average size of enterprises is only one fourth of the world average. Due to the failure to make full use of economies of scale, China's electrolytic aluminum industry has a low international competitiveness. Therefore, only under the preferential policies of low electricity prices and export tax rebates can export prices be competitive. The blind and disorderly expansion of electrolytic aluminum production capacity in this round of economic overheating has further distorted the rational distribution of the industry, increased the difficulty of structural adjustment, and constrained industrial upgrading and overall profitability enhancement.
So how should we respond? For electrolytic aluminum companies, the realistic choice is to increase the utilization rate of existing production capacity, reduce the power consumption of aluminum products per unit through technological innovations, and fix the price of alumina by entering into long-term contracts with international alumina exporters. For the industry and the government, it is necessary to strengthen macro-control efforts to avoid further blind construction and low-level expansion of the industry, promote mergers and acquisitions among enterprises to optimize the industrial structure and give full play to the scale effect. If the electrolytic aluminum industry is unable to reverse its decline in the short term after it has fallen into full loss, then the government should consider giving certain preferential policies to promote the industry's reasonable growth under the premise of intensive production and increasing industrial concentration.