Aluminum Corp of China Ltd, the nation's biggest producer, has said it may lose 30,000 metric tons of output after it halted some capacity at two ventures in Shanxi Province because of a power shortage.
Shanxi Huaze Aluminum & Power Co suspended 25 percent of its 280,000-metric-ton annual capacity as of July 18, and Shanxi Huasheng Aluminum Co stopped 22 percent of its 220,000-ton capacity, Chalco, as the company is known, said.
The estimated loss "is too small to ease a supply glut in China," Li Rong, an analyst at Great Wall Futures Co, said in Shanghai. Aluminum futures in London may have priced in a bigger production loss, he said.
Aluminum jumped to a record US$3,380.15 a ton on July 11 after China's producers pledged to cut output by as much as 10 percent by the end of September to help ease a nationwide power shortfall, Bloomberg News said.
'Forced'
The pledge came after the Shanxi government cut power to smelters, forcing Chalco and others to reduce production.
Chalco's two Shanxi ventures "were forced" to halt production cells because of reduced power supplies, it said. Power supplies "look to remain tight in the coming months," it said. The cuts are likely to last until September as the power shortage is expected to persist throughout the summer, with re-start of the smelters taking about a month, Eric Zhang, an analyst at CBI China Co, said in Shanghai.
The Shanxi government won't want too great a cut in output because that would reduce tax revenue, he added.
Aluminum has declined 10 percent from the July 11 record in London as higher inventories offset concerns about a Chinese production cut. It was little changed at US$3,031 a ton at 3:15pm Hong Kong time.
China's production of aluminum may increase to 15.5 million tons this year from 12.6 million tons in 2007, outpacing demand of 15 million tons, CRU International Ltd said in October.
(Shanghai Daily July 22, 2008)
