Alumina industry: reduction in production or only a symptom

A wave of alumina production reduction that has almost swept the world has shrouded the entire alumina industry in the haze of overcapacity, and has also rapidly cooled the industry overheating caused by rapid expansion in recent years. It should be said that this is due to weak international and domestic demand. Under the background, it is inevitable for enterprises to expand blindly.　　　　 Some people in the industry believe that the direct cause of the reduction in production is the change in Indonesia’s bauxite export policy that has increased the cost of my country’s import of bauxite. However, another main reason is that in the context of weak domestic demand, the country has not stopped its frantic expansion.　　　　 It is reported that in the first half of 2007, due to a sharp increase in new projects in some industries, the Development and Reform Commission and other five departments have issued special notices requiring all regions to clean up new projects above 100 million yuan, and the alumina industry is even one of the key cleanup industries. In the first half of 2008, due to the problem of overcapacity, alumina companies reduced production one after another, but they were still unable to boost market prices. The direct impact of the surge in domestic alumina production is the decrease in alumina imports and the increase in bauxite imports. When domestic resources are unable to support domestic demand, alumina production companies continue to expand production capacity but do not have sufficient supply of raw materials, resulting in a sharp increase in import dependence, which directly leads to the increase in imported bauxite prices and the decline in alumina prices. Under the double pressure, most factories were unable to bear it and were forced to cut production.　　　　 In just a few years, the alumina industry has repeatedly faced industry-wide production cuts due to overcapacity and falling prices. Perhaps this is because the price law is playing a huge role in regulating and guiding the imbalanced commodity supply and demand status to rebalance.　　　　 Overcapacity will inevitably have a very negative impact on the development of the industry. There are many reasons for the problem of overcapacity. The first is the imperfect investment and financing system, companies ignore market conditions, and blindly invest for profit, etc. Of course, there are also soft constraints on the long-term low prices of factors such as land, energy, and manpower, etc. . Despite these force majeure constraints, before making a decision to expand production, companies can first accurately evaluate and predict the future supply and demand of commodities and their own competitiveness, which can greatly avoid their own losses.　　　　 However, compared with overcapacity, sluggish demand has a greater impact on the profitability of the alumina industry. Production cuts can only slow down the excess of alumina, but cannot restore the sluggish alumina price. Therefore, if the hope of saving the market is only pinned on a reduction in production, it may be in vain. The repeated expansion and reduction of production in recent years are proof.　　　　 But relative to production cuts, boosting market demand is a difficult subject. The market is complex, and the influence of the global economy and the development of related industries all affect the alumina market. The driving force for boosting market demand comes more from macroeconomic policies and the degree of market economic prosperity. The development of upstream and downstream alumina and the firmness of aluminum prices also affect the alumina market. Therefore, as a company, the way to avoid risks is to analyze the market situation objectively and scientifically, and cannot blindly follow, and make decisions that are in line with its own strength and market development. Only in this way can we occupy an active position in the rapidly changing market. The information is picked from the Internet and does not represent a position. If there is any infringement, please contact our back-end staff to delete it.
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