Aluminum ingot consumption is likely to be affected in Gongyi, Henan province as local downstream processors would see staggered suspension during July and August.
Except for the top 30 enterprises, all gas emission-related industrial plants in the city are required to suspend their smelting furnaces for one month during the period. A formal government notice is expected to be released in the next couple of days, we learned.
We believe the target of this measure is small and medium-sized cast coil producers as July and August is the traditional low season for aluminium plate/sheet and strip producers. Some of the major plate/sheet and strip producers are also in the list of top 30 enterprises which are exempted from the restrictions.
Discounts of aluminium ingot are expected to widen in the region following the staggered suspension, while supply of cast coil would be tightened, we believes. The impact, however, is not expected to spread nationwide.
Production of aluminium hot-rolled coil, cold-rolled coil and foil are not expected to see any impact.
Tighter cast coil supply may also see producers abandon export orders to ensure domestic sales.