China’s Hongqiao Group remains on top of the aluminum production industry following a risky-but-logical declaration last week regarding an increase of the company’s production capacity.
On March 14, Hongqiao chief executive Zhang Bo announced their plan to increase production capacity of aluminum by the end of 2016 to 6 million tonnes or about 16 percent higher from their 5.19-million-tonne produce in 2015, per a report from the Financial Times.
Understandably, the company will continue with this course depending on the market conditions.
"If demand is good, we will stick with the plan. If not, we can slow down new capacity expansion or even suspend it," Zhang said.
Fortunately, the market did do good as Forbes reported how Hongqiao "devoured" the international aluminum industry.
Apparently, the company saw a 3.5-percent rise in the company's stock market standing.
Because of this, the company remained the world's top aluminum producer, making sure that their Moscow-based competitor Rusal does not take back the crown.
"Ultimately Hongqiao is taking market share from other producers, as they are one of the lowest-cost producers in China and globally," JPMorgan Chase analyst Daniel Kang told the Aluminum Insider.
Furthermore, Forbes contributor Gordon G. Chang believes that Hongqiao's move was both logical and risky, considering that the company was among those who initially cut down production of aluminum in 2015 due to the product's stumbling prices.
According to a Reuters report in December, Hongqiao cut their production capacity down by 250,000 tonnes.
"We will not consider resuming production of the (250,000 tonnes) capacity," an official of the company reportedly told the outlet, adding that the move was to help boost aluminum prices that were at a seven-year low at the time.
Now, it seems that the tides have changed and the Shandong-based aluminum product manufacturer decided to profit from the low aluminum prices and took advantage of their in-house production advantage.