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Chalco halts production in Shanxi venture

(China Daily/Agencies)
Updated: 2008-07-08 10:13

Aluminum Corp of China Ltd, the nation's biggest producer of the metal, is halting production at a venture in the northern province of Shanxi because of a power shortage.

The provincial government ordered smelters to cut output to ensure power supply for farming, Wang Suomin, a manager at the Shanxi Huaze Aluminum & Power Co venture, said by phone yesterday. The venture has an annual capacity of 280,000 metric tons.

"This will boost aluminum prices," Le Yukun, an analyst at BOC International Ltd, said by phone from Shanghai. "Power shortages may spread and worsen, forcing more output cuts."

Aluminum for three-month delivery rose to the highest in four months in London. It gained as much as $85, or 2.7 percent to $3,245 a ton, the highest intraday price since March 6. It traded at $3,236 a ton at 8:42 am London time. The metal rose 1.8 percent to close at 19,700 yuan ($2,871) on the Shanghai Futures Exchange at 3 pm.

The government ordered smelters to halve output, and producers with 700,000 tons of capacity may have been affected, analyst Eric Zhang of research company CBI China Co said. That's nearly 5 percent of output in the world's largest producer. CBI didn't name the affected smelters.

Shanxi, China's biggest coal-producing province, issued a "red" warning on power and will limit supplies to energy intensive and polluting factories, the State Electricity Regulatory Commission said yesterday. Power shortage in the province reached 4,647 mW as of June 26, the commission said.

There is a power shortage in the Shanxi province, said Zhang Qing, a spokeswoman with Beijing-based Aluminum Corp, better known as Chalco. Zhang said she wasn't aware of the production situation in Shanxi.

Huaze is "gradually" cutting output, Wang said, without giving a loss estimate at the venture, which is owned by Chalco and Shanxi Zhangze Electric Power Co.

The bigger smelters in the province include Shanxi Huasheng Aluminum Co and Shanxi Guanlu Co. Huasheng is a joint venture between Chalco and Shanxi Guanlu, with an annual capacity of 220,000 tons.

Zhen Qijia, secretary of Shanxi Guanlu, said he is unaware of the situation at Huasheng. Calls to Huasheng were not answered.

China is the world's largest producer of aluminum, which is used in aircraft and cars, with a total capacity of more than 15 million tons.