China gradually strengthens control over new alumina production capacity to curb the industrial investment

Hong Kong November 15 news: China has gradually strengthened its control of new alumina production capacity to curb investment in the aluminum raw material industry. Industry insiders said on Wednesday that the move is unlikely to support alumina prices in the coming months. The price of alumina has fallen by more than 50% since July, because of the increase in Chinese production. An investment official in Liaocheng City stated that Beijing has asked Xinfa Electrolytic Aluminum Group in Liaocheng to stop building its annual 1.2 million tons of alumina facilities because the smelting facility has not obtained approval from Beijing. Xinfa is China's second largest alumina refining company after China Aluminum. The official said: "The construction of the smelting plant has been temporarily suspended since October and is still being approved. The smelter will be restarted immediately." She also said that Xinfa is currently seeking Beijing's approval. The official said Xinfa is actively building a total capacity of 3 million tons based on the existing alumina plant in the Chiping area. Among the total planned production capacity, 1.8 million tons have been built and approved by Beijing. The official said: "The smelter's infrastructure has been built 3 million tons of planned capacity, all companies only need to complete the remaining 1.2 million tons of auxiliary facilities on it." Alumina production Xinfa had previously planned at the end of 2006 Before the completion of expansion of production capacity. However, industry officials said that this plan may be delayed because Xinfa's expansion capacity could not be turned to the alumina market. From January to October, China's alumina production increased by 53.7% year-on-year to 10.7 million tons. It is expected that output in 2006 will increase by more than 60% to 14 million tons. Shandong Lubei Group set up a 50,000-ton alumina refinery in just a few months and expects to double production by March 2007. A manager of the company said: "Since we have entered the company, we hope to make the business bigger." Lubei also hopes to build an aluminum smelter with an annual output of 500,000 tons to digest alumina production. The manager stated that Lubei had planned to complete the expansion project by the end of this year, but the low price of alumina has caused it to delay construction completion until March next year. According to trade insiders, Chalco's offer for spot alumina in China is RMB 2,400/t (US$305/t), compared with RMB 5,650/t in August this year. Other refineries in China are quoted at RMB 2,300-2,400/t. The decline in China's prices also caused Chinese smelters to reduce their imports, which also weighed on alumina prices in the market. The exchange rate of overseas spot alumina to China port was US$235/ton, which was 53% lower than that of US$500/ton in early July. (1 US dollar = 7.8663 yuan)