UPDATE 1-China Guizhou Orders Aluminium Smelters to Cut Output

HONG KONG, Sept 20 (Reuters) - Power-hungry smelters in Guizhou, one of China's major primary aluminium producing provinces, have been ordered to cut production, in efforts to help meet Beijing's target to reduce energy intensity, smelter officials said on Monday.

The move may temporarily shut 30 percent of around 850,000 tonnes of operating annual capacity in the southwestern province, cutting some 80,000 tonnes of metal production between September and December.

The affected capacity in Guizhou is small compared to the 15.3 million tonnes of annual operating capacity in August in China, the world's top producer of the metal, but the cut may have a spillover impact and prompt other provinces to follow suit, an analyst at Essence Securities, said.

Beijing aims to phase out a total of 339,000 tonnes of outdated aluminium capacity this year and is encouraging local governments to limit electricity supplies to power-hungry smelters as it tries to cut energy intensity 20 percent from the 2005 level by the end of this year. [ID:nLDE67812Y]

"The cut would have a positive impact on prices," Heng Kun, chief equity analyst at Essence Securities, said of Guizhou.

Chinese aluminium prices AL-A00-CCNMM have risen one precent this month to 15,400 yuan ($2,295) per tonne on Monday.

"We received a notice last week ordering our smelter to cut production," an official at a smelter in Guizhou said, adding that local smelters were asked to cut production by 20 to 50 percent from current operations until the end of October.

The smelters were also barred from starting up new capacity and reopening capacity that had been idled, he said, adding the provincial government would review the policy after October.

A 250,000-tonne-a-year smelter in Zunyi started closing a 60,000-tonne production facility on Sunday and that capacity is unlikely to be reopened for the rest of the year, an official at the smelter said.

China's top aluminium producer, Chalco (2600.HK: Quote) (601600.SS: Quote), has two plants in Guizhou, and two company spokeswomen were not available to comment.

Heng at Essence said the Guangxi government was also cutting power supplies to local aluminium smelters this month.

He estimated less than one million tonnes of China's 21.5 million tonnes of annual aluminium capacity had idled, including the closed capacity in Henan.

Smelters in China's top aluminium producing province, Henan, have idled around 700,000 tonnes of primary aluminium capacity since June, more than 15 percent of the total annual capacity of 4.6 million tonnes due to low prices at the time in China, and the provincial government did not restrict power supplies to the operating smelters.

Chinese aluminium prices were unlikely to rise sharply from current levels unless the two top producing provinces Henan and Shandong cut power supplies to local aluminium smelters, thanks to expanded capacity and high aluminium stocks in the country, Heng estimated. ($1=6.71 yuan)