Four Refined Aluminum Smelters Plan to Cut Production

SHANGHAI Jul. 25 (CBI China)--In response to calls for a joint production cut, four domestic refined aluminum smelters plan to cut production, according to a statement on July 21st by the China Non-ferrous Metals Industry Association (CNIA).  The four smelters are Yichuan Power Group, Henan Shenhuo Aluminum Company, Yunnan Aluminum Company, and Hunan Chuangyuan Aluminum Company. 

    Sources said Yichuan Power Group delayed the start-up of its electrolytic bath, originally scheduled to come online in early July, would not restart units presently in maintenance, and promised to partially shut other operating units when necessary.  Henan Shenhuo Aluminum closed 12 electrolytic baths with 200KA, and 10 electrolytic baths with 350KA, and would not restart any units undergoing regular maintenance each month.  Yunnan Aluminum would not put 20 electrolytic baths in maintenance into production.  Hunan Chuangyuan Aluminum closed electrolytic baths with 300KA.  In addition, Nanshan Aluminum also planned to shut down its electrolytic bath for maintenance ahead of schedule. 

    CBI believes growing power supply shortages and soaring prices of coal needed for power generation are the real reasons behind production cuts at domestic refined aluminum smelters. 

    As reported in previous CBI briefings, there is little real possibility refined aluminum smelters will reduce production voluntarily when profits are still available.  As electricity power supplies tightened in Shanxi province, the Power Supply Department reduced supply to aluminum smelters in order to secure residential power supplies, causing some smelters to shut down electrolytic baths.  For those smelters with their own power plants, supply of coal used for power generation was not as tight as media reports suggested.  In fact, it was soaring prices of coal that directly increased power costs at those smelters. Rumors reported that costs at one smelter in Henan province with its own power plant were actually higher than those without power plants, so even smelters with power plants were facing a profit squeeze from power costs and not power shortages.  In this context, those smelters with power plants, mainly located in Henan, Shandong and Hunan provinces, will likely prolong maintenance or delay start-up of new projects.