In 1952 high school students levelling the ground for a sports field in Jiangsu stumbled across the tomb of Zhou Chu, a Jin Dynasty general who lived from 265 to 316. The body was long gone, but not the metal belt he had been wearing. Tests showed some tiny metal pieces containing aluminium alloy.
It was a remarkable discovery because European scientists had only found a means to isolate aluminium from bauxite in the early nineteenth century. The mystery of whether China had been able to smelt aluminium 1,500 years before the rest of the world has never been fully resolved. But three academics from St Andrews University noted that it is “unequivocally” impossible for Jin Dynasty technology to have achieved temperatures required to produce aluminium and “so the finds cannot be authentic”.
Instead they posit that the pieces of metal were placed in the tomb at the time of the find as a sort of archaeological practical joke.
What’s beyond doubt is China’s colossal ability to smelt aluminium in the current century. Since 2010, domestic smelters have introduced 14 million tonnes of new capacity, ramping up production by 44% over the past two years.
In 2015, China accounted for half the world’s aluminium output of 57.9 million tonnes. It is also the leading cause of a supply glut, which depressed prices to a six-year low on the London Metal Exchange last November.
Prices have ticked up slightly since then, following a modest rebound in China’s industrial production figures. But the outlook for 2016 remains universally bearish despite the government’s efforts to push ahead reforms across commodity- producing industries.
Late last month, Antaike, the research institute for the China Nonferrous Metals Industry Association, said a group of six producers are establishing a joint venture to stockpile one million tonnes of aluminium to bolster prices. They include state giants Chinalco and State Power Investment Corp.
Chinese media said the six will coordinate and monitor production levels across the group, and seek loans from the China Development Bank. Similar collective initiatives are reportedly being considered by zinc and copper producers.
But spot prices did not react positively to the news. In fact, they fell 1.3% in Shanghai the day the announcement was made, with the 21CN Business Herald suggesting that the market may be still waiting for fuller details.
Western media outlets have a rather different interpretation. Trade publication Metal Miner describes the move as the “dumbest idea to have come out of China for a while”. Reuters also takes a dim view. Describing China as the “gargantuan elephant in the room,” it adds this is “quite literally a case of stockpiling up more problems for the future”.
It commends the government for tying the level of financial support on offer to the amount of capacity which is idled. But Reuters says this capacity will simply kick back in as soon as prices stabilise. It adds that China needs to follow the lead of US producer, Alcoa, and permanently decommission capacity.
Analysts agree it will take time to remove a very large inventory overhang – estimated at 14.9 million tonnes held in off-exchange warehouses. However, Antaike says Chinese producers have mothballed 9.1 million tonnes of alumina capacity since November and a further 2.3 million tonnes will soon be closed.
Past government efforts to mothball capacity across heavy industry have not proven entirely successful. Some say this time is different, with Chinese President Xi Jinping willing to sacrifice GDP growth for longer-term aims and determined to stamp his authority on his first full Five-Year Plan, which begins this year.
Along these lines, the government last month announced a Rmb30 billion ($4.56 billion) fund to remove excess capacity in the coal industry and redeploy workers. A similar fund is expected to cover the steel sector.
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