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Aluminum Prices in China Drop Below Cost, Chalco Says (Update1)
Jun 8,2010 10:40CST
industry news

SHANGHAI, June 8 -- Aluminum prices in China have dropped below the cost of production, putting pressure on smelters to reduce output, the nation's biggest producer said.

"Prices of aluminum have dropped below the cost of production," Luo Jianchuan, president of Aluminum Corp. of China Ltd., said today at an Antaike aluminum conference. The recent electricity price increases will have a "significant" impact on smelters, Luo said.

China, the world's largest maker of the metal, said last month it will raise power surcharges for some aluminum companies by as much as 100 percent from June, to curb overcapacity. Producers are weighing output cuts because of increase, Liu Xu, an analyst at China International Futures Co. said last month.

Producers in China are probably unprofitable as the current price is below the average 15,300 yuan production cost, said Wan Ling, a Beijing-based analyst at CRU International Ltd. CRU expects 1.3 million tons of capacity in the country to be affected by the surcharge. Energy accounts for as much as half the cost of producing aluminum.

The effect of the higher energy prices on Aluminum Corp., known as Chalco, will be limited, because only a few of its smelters enjoyed the cheaper rates, Luo said without giving details.

Aluminum in London has fallen 16 percent this year on concern Europe's debt crisis may derail the global economic recovery.


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