(Minews) - Aluminum Corporation of China (Chalco) has temporarily halted operations at some of its aluminium and alumina plants in the face of an ailing domestic market.
China’s biggest aluminium producer is suspending 600,000 tpy of aluminium capacity and 800,000 tpy of alumina capacity, as it initiates “flexible operation” at some of its facilities, it said in a statement filed with the Shanghai Stock Exchange on Thursday April 17.
The public company attributed the decision to “severe oversupply in the aluminium sector, ailing prices and relatively high power costs”.
However, it did not provide any further details on which of its facilities had been subject to stoppages or how long it would last.
Chalco officials were not available for comment at time of writing.
Market response to the news was lukewarm, as participants noted that smelter had been scaling down production as early as the fourth quarter last year.
“This will not boost the market as Chalco has been carrying out production cuts for a while,” Wang Rong, an analyst of Guotai Junan Futures in Shanghai, said.
Chalco’s two smelters in Guizhou reduced output after the Chinese New Year holidays, and its alumina refineries in Shandong, Henan and Chongqing reportedly cut production in the first quarter.
The output cut is “trivial” when compared with China’s massive aluminium and alumina capacity, SMM analyst Liu Xiaolei said.
China has about 32 million tpy of aluminium capacity and 60 million tpy alumina capacity. Chalco produced about 3.84 million tonnes of aluminium and 12.14 million tonnes of alumina last year.
“It is also not a surprise to see such a move from Chalco, as its costs have been high among local smelters,” Wang said.
The smelter conducted a similar move in June last year.
Recent delays in new capacity coming online in north-west China, where energy is cheaper than other parts of China, are more revealing about how weak the domestic aluminium market has been.
In Inner Mongolia, Baotou Aluminium has postponed commencement of its 150,000 tpy aluminium smelter to June, according to market sources. The plant was originally due to start in early April.
On Thursday April 17, the Shanghai Futures Exchange July aluminium contract rose 50 yuan to end at 13,310 yuan ($2,156) per tonne.