China output deepens aluminium gloom

Sinking aluminium prices and a ballooning surplus of the metal have deepened the industry’s worst crisis in years, intensifying pressure on high-cost smelters to embark on another round of production cuts to revive prices from their malaise.

The 25% drop since last September has pushed benchmark London Metal Exchange prices to six-year lows, and the plunge this year in premiums, surcharges paid for physical delivery, to their lowest in 3-1/2 years are the biggest test for producers’ margins since the 2008 financial crisis.

More than 10% of smelting capacity outside of China, or 3.5 million tonnes of production, is running in the red with a combined LME and US premium of $1,800 per tonne, according to Wood Mackenzie data from second-quarter results.