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China Guangxi Aluminum Smelters Start to Cut Output, CRU Says
Sep 13,2010 16:56CST
industry news

Sept. 13 (Bloomberg) -- Aluminum smelters in China's Guangxi region have started to reduce production in order to meet the local government's energy conservation goals, said an analyst at CRU International Ltd.

Three smelters in the region are shuttering about 250,000 metric tons of annual capacity, Wan Ling, Beijing-based aluminum analyst said by phone. "They were asked by the local government to cut a third to half of their production," said Wan, who surveyed local industry officials. That represents about 2 percent of China's total output last year, according to Bloomberg News calculations.

Some local governments in China, the world's largest aluminum producer, have ordered energy-intensive plants, including those of steel, cement, and aluminum producers, to suspend part of their operations. Power consumption by aluminum smelters accounts for 6 percent of the country's total, according to data provider Shanghai Metals Market.

"This is the topic now, so people have become very sensitive about it," Liang Lijuan, an analyst at Cofco Futures Co., said by phone from Beijing. Still, "I don't think it will cut the country's overall output significantly."

Production of aluminum, used in cars, packaging and homes, gained 37 percent in January-August from a year ago to 10.84 million tons, said China's statistics bureau today.

The Guangxi smelters suspending output have a total annual production capacity of 500,000 metric tons to 600,000 tons, CRU's Wan said. Wan declined to identify which smelters were involved.

Energy Saving

A group of officials from China's 13 central government bodies had started to visit 18 provinces and regions to ensure that local governments had eliminated outdated capacity as ordered and controlled energy-intensive users' production to meet energy saving targets, said the National Development and Reform Commission on its website Aug. 30.

The country's top economic planner said June 10 it might be "difficult" to achieve the goal of cutting energy use per unit of economic output by 20 percent in the five years through 2010.

"Guangxi is quite serious this time," Wan said. Wan said she hadn't heard of any smelters in other regions that had started to cut output. Spot aluminum prices are quoted at 15,280 yuan to 15,320 yuan a ton today at Changjiang Nonferrous Metals Market in Shanghai, up from 15,150 yuan to 15,190 yuan on Friday. Aluminum for three-month delivery on London Metal Exchange has declined 4.5 percent this year, and was 1.5 percent higher at $2,130.50 a ton at 2:58 p.m. in Shanghai.

Steel Cuts

Two joint ventures run by Aluminum Corp. of China Ltd. in Shanxi province and a plant in Zunyi city in Guizhou province may be affected by the power reduction targets, Heng Kun, an analyst at Essence Securities, said on Sept. 9.

Shen Hui, a Beijing-based spokeswoman, was not immediately available for comment. Chalco also has a plant in Guangxi province, which has an annual output capacity of 150,000 tons.

Beijing's determination to achieve its energy conservation target may trim the country's steel output by 9.6 percent for the rest of the year, as provinces including Hebei and Shandong limited power supplies, Mysteel Research Institute said on Sept. 9. The steel industry accounts for 35 percent of the nation's power consumption, according to China International Capital Corp.

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