SHANGHAI, May 24 (SMM) -- Sources from the Henan Development & Reform Commission report that the Henan provincial government will not approve construction for new aluminum capacity, whether new or expanded capacity, for the next three years in order to deal with overcapacity in selected sectors and to help manage industrial development in the province.
China's Central Government has issued a series of new policies to limit high-energy-consumption capacity since early 2010 which are in line with broader strategic requirements to adjust industrial structure within China.
Henan province is China's largest alumina, aluminum, and aluminum processing region, with aluminum output in 2009 ranking first in China, and with alumina and aluminum processing among the top three provinces. In addition, Henan province has an integrated industrial supply chain for aluminum following lengthy strategic development of its aluminum sector. However, Henan province has gradually lost its resource advantage as resources dwindle and as resource prices increase, with bauxite reserves now below that of Shanxi province and regions in southwest China. In addition, electricity supply and power generation costs are both now more costly than those in northwest China. As a result, there is a limit to how much Henan province can continue to expand its aluminum smelting capacity.
China's aluminum industry is now in an industrial transition period, and alumina producers will likely begin to shift operations to other regions rich in bauxite resources, while aluminum producers will likely shift production to other areas with more abundant and stable electricity supplies.
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