Chalco Shuts 10% of Aluminum Output Capacity on Energy Curbs, Analysts Say

Aluminum Corp. of China Ltd., the nation’s biggest maker, has shut 10 percent of its aluminum- producing capacity after local governments implemented power restrictions, according to analysts.

Smelting plants with a combined capacity of at least 400,000 metric tons were closed as local governments limit power use for industrial producers, Heng Kun, a Shanghai-based analyst at Essence Securities Co., said by phone today. The plants are in Henan, Guangxi, Guizhou and Shanxi, he said.

Shen Hui, a spokeswoman for Beijing-based Aluminum Corp., known as Chalco, declined to comment when asked about cuts.

“Our calculations show they have shut about 400,000 tons, around 10 percent of the company’s total output capacity,” said Wan Ling, a senior consultant at CRU International Ltd.

China, the world’s largest aluminum maker, has started to control production of energy-intensive industries such as steel and aluminum in some regions, as Beijing aims to meet the country’s energy-saving target set in its 11th “Five-Year Plan,” which ends this year. Energy represents as much as half the cost of making the metal used in cars, cans and airplanes.

Aluminum prices in Shanghai have surged about 19 percent since the end of June as smelters cut output on higher power tariffs and falling prices. Chinese authorities raised power surcharges for some smelters by as much as 100 percent from June to curb overcapacity.

Output Reductions

Jiaozuo Wanfang Aluminum Manufacturing Co., which is controlled by Chalco, cut capacity by 140,000 tons, and the output loss will be 30,000 this year, the Henan province-based company said on Oct. 18.

Chalco’s Zunyi Plant and Guizhou Plant, both in Guizhou province, halted a combined 200,000 tons of capacity, according to CRU’s Wan. The Pingguo Plant in Guangxi halted 80,000 tons and Shanxi Huaze Aluminum & Power Co. is also affected, according to Essence Securities.

Shares of Chalco lost 1 percent to HK$7.85 today, and are down 8.2 percent this year.

China will sell 96,000 tons of aluminum ingots from state stockpiles on Nov. 1 and Nov. 2, the National Development and Reform Commission said today on its website. This is about 20 percent of stockpiles reported by the Shanghai Futures Exchange, according to Bloomberg calculations.

“The sales of state stockpiles may very well be timed to counter lower supplies from Chalco and other producers,” said Beijing Capital Futures Co. analyst Xiao Jing.

SRB Stockpiles

China’s State Reserve Bureau, the government’s stockpiling agency which operates under the National Development and Reform Commission, bought about 590,000 tons of aluminum last year from domestic smelters. Commercial stockpiles of primary aluminum in China are at 400,000 tons to 500,000 tons, according to Beijing Antaike Information Development Co. estimates last month.

“It’s not a large amount given the current level of inventories in China,” said Pang Ying, an analyst at Shenzhen Rongtuo Trading Co. “The government probably wants to send a signal they are serious about combating inflation. They probably chose aluminum because that’s the metal they have most of.”