REUTERS China to cut aluminium output but surplus may grow [DBYHNPT]
By Polly Yam
HONG KONG, Nov 28 (Reuters) - Several Chinese aluminium
smelters may cut or even stop production next year because of
high prices for power and their raw material, alumina, industry
officials said.
But while Chinese smelters were unlikely to run at full
capacity, the country's State Development & Reform Commission
(SDRC) believed China may still be left with a surplus 1.2
million tonnes of aluminium for export next year, said a smelter
official who had read an internal report from the commission.
The SDRC said in the report China would have capacity to
produce 7.2 million tonnes of aluminium in 2004 but output would
be just 6.2 million tonnes. Demand would not be over 5 million
tonnes, the official said late on Thursday.
"You don't need to worry about aluminium production in China.
It's still producing more than it needs," an aluminium fabricator
in China said.
Official data shows China exported a net 311,205 tonnes of
primary aluminium in January-October this year.
"As far as I know, more than 10 smelters are considering
stoppages or cuts. One smelter already said it would shut down a
65,000 tonne-per-year potline next year," one Chinese smelter
source said.
"Many smelters may stop or cut production if alumina prices
rise to 4,500 yuan a tonne," another Chinese smelter source said.
Prices for spot imported alumina have risen to about 4,300
yuan a tonne in Chinese ports, up from 3,700-3,800 yuan a month
ago, following rising international prices.
An expected global shortage and increased buying by Chinese
smelters for January-June shipment have pushed up spot
international alumina prices to around $400 a tonne CIF China
versus about $390 last week and $355 a month ago.
In 2003, China is expected to produce about half of the 11
million tonnes of alumina it needs.
HIGH POWER COSTS
Smelter sources said most Chinese aluminium producers paid
higher power fees after many provinces suffered power shortages
in the middle of this year. Power fees account for a major slice
of production costs.
An official from the China Nonferrous Metals Industry
Association said in the middle of this month that power fees for
about 71 percent of China's 4.35 tonnes of aluminium produced
last year were already higher than 0.25 yuan per kilowatt hour.
Industry sources said some Chinese smelters planned to resell
part of their contracted alumina and power to other smelters, to
take advantage of high prices.
"It's more profitable (to resell the alumina and power) than
to produce aluminium. That kind of alumina and power would be
cheaper than spot," the first Chinese smelter source said.
The SDRC may want to see small and old smelters shut down in
line with its efforts to cap the industry's mushrooming capacity.
Attempts to restrict capacity have seen little success to date.
The planning body said in a previous report Chinese smelters
that use outdated Soederberg technology have a combined capacity
of about 1.3 million tonnes.
State-controlled Aluminum Corp of China Ltd (Chalco)
<2600.HK> told customers in a meeting on Wednesday in Chengdu
that it would not sell alumina to small smelters using outdated
Soederberg technology, customers said.
Chalco, the country's dominant alumina producer, produces
more than 90 percent of China's total output of the raw material. |
