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To: TobagoJack who wrote (2970)	12/8/2003 8:43:06 AM
From: russwinter	Read Replies (3) \| Respond to of 110194

More "hitting the wall" indications": Reuters China power shortage hits aluminium smelters Monday December 8, 5:29 am ET By Nao Nakanishi HONG KONG, Dec 8 (Reuters) - The arrival of winter in China has added to concerns among the country's aluminium smelters that they may be forced to reduce or suspend production as a result of power shortages, traders said on Monday. They said some smelters had already redued output because high energy bills were wiping out profits. Smelters were already being squeezed by the rising price of alumina, the main raw material for producing aluminium. Some traders said they would consider importing aluminium to meet orders after the Chinese New Year in January. "High alumina prices and the power shortage are two big risks to aluminium smelters. That is why we are talking to our foreign suppliers," said a trader. "Maybe one day (next year) we will go outside China to buy aluminium again." The energy shortage has resulted from a combination of reduced coal production, a seasonal decline in hydroelectric power generation and a surge in domestic power consumption. In addition to higher power prices, smelters must contend with lower availability as the government gives priority to supplying energy to domestic users. "The Chinese New Year is the hardest time for Chinese smelters because the government cannot let people stay at home and suffer from blackouts," said a trader in Beijing. Traders said some parts of China saw coal prices surging by 100 to 200 percent in the past few months as heating demand had kicked in. This has exacerbated a nationwide electricity shortage resulting from China's 8.5 percent economic growth this year. Coal accounts for around two-thirds of China's electricity generation. Dry weather has also reduced production at hydroelectric power stations, which account for most of the rest of supply. SMELTERS SELLING POWER "Some smelters are considering selling power at premiums, instead of producing aluminium," said another trader. "They say they'd be better off. Many are making losses." Some traders said a shortage of trucks had exacerbated the coal shortage at power plants, as the country's traffic police had recently tightened loading regulations. "Very few (smelters) admit they are cutting back. But I don't think we have seen the worst yet," said one industry source in China, referring to the power shortage. Traders and smelter sources did not specify the likely extent of the production cuts. They said much of the reduction would result from the closure of smelters using the outdated Soederberg process, which the government is encouraging producers to phase out. China would produce around 5.3 million tonnes of aluminium this year and 6.2 million tonnes in 2004, Pan Jiazhu, deputy chairman of the China Nonferrous Metals Industry Association said last week. But that would lag behind national capacity of 7.5 million tonnes at at end-2003 and 8.75 million tonnes at end-2004, Pan said. Some traders said spot alumina prices might be nearing their peak after edging higher to around $410 to $415 per tonne CIF China from around $400 in late-November. They stood at around $300 about six months ago and at around $160 one year ago. "I don't think this price will last for a very long time," one of the traders said. "If smelters rely purely on spot alumina, they are losing 1,000 to 2,000 yuan ($121 to $242) per tonne." "If they shut down or cut down production, they will release their alumina and provide some relief to the tightness," he said.