China Guangxi Aluminum Smelter to Add 250kt Output in 09

GUANGXI, May 20 -- Guangxi Laibin Yinhai Aluminum Co., a subsidiary of Guangxi Investment Group Co., plans to produce an additional 250kt of aluminum this year, a company spokesman said Tuesday.

    Some 500kt of new production capacity is to be created by June, but only about half of the new capacity will be utilized this year because the aluminum market is still relatively weak, said Yang Fan, a spokesman.

    Yang confirmed the smelter would aim to fully utilize the additional 500kt capacity next year.

    The smelter has an existing capacity of 125kt, Yang said.

    The Guangxi Autonomous Region smelter completed the first of two phases of construction of its plant in September, with the second due for completion in June, Yang said.

    Earlier press reports said the plant was built with an investment of RMB 4.3 billion. Construction began in June 2007.

    Laibin Yinhai is one of 38 companies owned by Guangxi Investment Group Co., the region's largest state-owned enterprise. Guangxi Investment Group manages a wide array of the region's assets, including electricity, nonferrous metals, securities and fertilizers.

    It also has acted as a bailout agent for local businesses.

    In March this year, the group arranged to secure a loan to buy 50kt of aluminum from Laibin Yinhai at RMB 12,500/mt , in a move aimed at soaking up surplus stock while propping up prices and keeping local projects afloat.

    Guangxi isn't the only authority bailing out local aluminum smelters through this route.

    This month, Henan province started buying 500kt of excess aluminum from local smelters.

    However, a provincial nonferrous metals association official said Henan still aims to add up to 800kt of new output capacity this year.

    Analysts point to Laibin Yinhai's 500kt project as more evidence aluminum smelters may be in too much of a hurry to get output back on track, a risky move in a climate that suggests some cooling in Chinese demand and too much supply in the market.

    "It's not just idled aluminum smelter capacity that is (now) restarting in China, but also new capacity," said Barclays Capital.

    The Guangxi region is a major producer of alumina, aluminum, tin and other minor metals.

    (Source: Dow Jones)