HONG KONG, June 28 -- Aluminum smelters in China's Henan province plan to idle 700,000 tonnes of annual production capacity by early July on low prices and high costs in the world's biggest manufacturer of the metal.
Liu Libin, vice-chairman of the Henan Nonferrous Metals Industry Association, said on Monday that 13 smelters had started production cuts in the middle of June in the province, which produces a fifth of China's aluminum production.
"Smelters are suffering losses of near 2,000 yuan ($294) per tonne," Liu told Reuters, referring to sale prices below production costs such as electricity.
Spot aluminum AL-A00-CCNMM traded around 14,630 yuan per tonne on Monday, down more than 15 percent from this year's high of 17,380 yuan seen in early January.
Liu said he expected the 700,000 tonnes of capacity would be idled by early July and unlikely reopened this year if aluminum prices stay weak.
"The move is unlikely to push up the prices given the capacity is small compared to China's total capacity unless speculation arises," Liu said.
China has around 20 million tonnes of annual aluminum production capacity.
"Smelters want to see profit margins of more than 1,000 yuan per tonne before they'd think about reopening," he said.
Henan has the capacity to produce 4.5 million of aluminum, of which 4.3 million tonnes of operated in May, Liu said.
Henan produced 3.1-3.2 million tonnes of aluminum last year, Liu said.
Based on Liu's expectation that the 700,000 tonnes of capacity will be idled by July, annual production would fall by 350,000 tonnes in the province.
Smelters in Henan had closed some capacity in late 2008 on weak demand and low prices, but gradually gradually restarted most operations from the second quarter of last year. ($1=6.7932 yuan)