Aluminum Output in China May Grow 23 Percent This Year

Aluminum output in China may grow to 16 million metric tons this year, even as the world’s largest producer curbs power supplies to smelters, said an official from the Ministry of Industry and Information Technology.

“The forecast has taken the output cuts into consideration,” Zhang Fengkui, head of the nonferrous metals office at the ministry’s raw materials department, said at a conference in Zhengzhou today. That’s an increase of 23 percent from 13 million tons last year, according to Bloomberg News calculations. Aluminum is used in production of cars and cans.

Aluminum smelters in Henan, Guizhou, Qinghai provinces and Guangxi region have started suspending some capacity as local governments strive to meet Beijing’s energy-conservation goals set for 2010. China last month imported more of the metal than it exported for the first time since May as energy curbs cut output.

“The high costs will drive aluminum smelters to cut energy consumption and move to more energy-rich regions in the west,” said Hu Changping, director of the aluminum department at the China Nonferrous Metals Industry Association. Power fees account for about half of Chinese smelters’ output costs, the highest level compared with producers around the world, Hu said.

Domestic production of the light metal has fallen every month since June after the government ended discounts on electricity charges and doubled surcharges for high-energy consumption companies.

Price Gains

Alumimum has gained 6.1 percent this year on the London Metal Exchange, reaching a six-month high this month of $2,459 a ton. The three-month contract declined 0.3 percent to $2,366.75 at 4:31 p.m. in Shanghai.

Nearly 1 million tons of capacity may have to be shut in Henan province, China’s largest aluminum-producing region, in the fourth quarter, the MIIT’s Zhang said in an interview at the conference.

That is an increase from an estimate of a 720,000-ton reduction in annual production by the Henan provincial nonferrous metals industry association on Oct. 11.

China has approximately 21.14 million tons of aluminum production capacity now and if there were no power supply controls, output would increase at a higher rate, Zhang said.

China has 3.6 million tons of aluminum capacity under construction this year, 80 percent of which located in western regions, said the association’s Hu.

Chalco Cuts

Aluminum Corp. of China Ltd., better known as Chalco, has 5 percent to 6 percent of capacity affected due to the power constraint, Vice President Jiang Yinggang said today, without elaborating.

The company, China’s largest aluminum producer, may have shut 400,000 tons of output capacity, or 10 percent of the total, said Essence Securities Co.’s Heng Kun and CRU International Ltd.’s Wan Ling on Oct. 22.

China’s consumption this year is forecast to reach 15.5 million tons to 16 million tons, growing to 27.4 million tons by 2015, as demand for light metal gains as energy-saving measures become more prevalent amid growing awareness of environmental protection, Chalco’s Jiang said.