Yuan Move Aluminum Impact Long-term -Minmetals

OSLO, June 25 -- China's Minmetals said appreciation of the Chinese yuan would not impact the country's aluminum industry immediately, but over time may accelerate an existing push towards production in regions with lower energy costs.

The Chinese authorities shifted currency policy last weekend to allow some appreciation in the yuan, which analysts say could pressure already high-cost aluminum producers in China.

"My personal opinion is that this (the currency regime change and expected appreciation) will not have immediate impact, but potentially have significant impact in the long-term," said Wang Feihong, senior analyst at Minmetals' Planning and Strategy department.

"It could promote a shift in the industry from a high power price area to a cheap power price area. We have already seen the beginning of this shift and maybe the policy will accelerate this process."

State-owned China Minmetals Corp is China's largest base metals trader.

Asked if potential yuan appreciation would trigger the closure of more high-cost aluminum smelters in China, he said: "Maybe it will increase the cost of some smelters in some areas. It's difficult to quantify because we may see both an increase in the production costs of Chinese smelters, and at the same time (see) an increase in demand."

Wang said he was "not very positive" on the outlook for aluminum prices for 2010 and 2011 despite demand recovering strongly both in China and in the rest of the world.

"We have to consider sky-rocketing inventories. I don't believe there is much potential for the aluminum price to go up this year. It will take time to consume part of the inventories." he said.

Asked if he was more upbeat on 2011, he said: "Maybe it will take longer for the market to rebalance."