China is the world’s fastest growing and second largest economy. Over 46% of China’s soaring GDP comes from the country’s rapid industrial growth. This industrial growth is predominantly driven by the massive urbanization taking place which is increasing demand for aluminium and the raw materials used in its production. Due to unmatched growth rates, China, which now plays the dominant role in the global aluminium market, is expected to remain the world’s largest aluminium consumer throughout the next 10-15 years. Already accounting for about a half of global aluminium consumption, China is forecast to boost this share to 59% by 2025.
China’s economic growth is largely fuelled by the country’s increasing population and large-scale urbanization. On the back of a surge in urban population along with the increase in average income China is now seeing a growth of the middle class – the major consumer of aluminium products. According to McKinsey Global Institute, from 2007 to 2025, the growing Chinese cities will account for 30% of global GDP growth.
The transport and construction industries jointly account for over 50% of total aluminium consumption in China. Hence, the development of these industries will have a substantial impact on the Chinese demand for aluminium. It is expected that the urbanization along with the urban income growth will drive the growth of transport and construction in China, thus propelling demand for aluminium.
China’s national environmental programme, aimed at increasing the industry energy efficiency and reducing CO2 emissions has led to a shutdown of a number of country’s aluminium smelters and caused a plunge in Chinese domestic aluminium production.
In July 2013, China set lower electricity consumption limits for aluminium smelters. Under the new rules, power consumption for new and upgraded aluminium smelters will need to be below 12,750 kilowatt hours per tonne for the liquid form and 13,200 kwh for ingots, while consumption for existing capacity will be required to be below 13,350 kwh and 13,800 kwh, respectively. In September 2013, China also announced it will cut coal consumption and shut capacity of polluting industries in key northern cities and provinces by 2017. Coal consumption in the northern cities of Beijing and Tianjin, and in Shanxi, Hebei and Shandong provinces, will be slashed by a total 83 million tonnes per year.