China's Chalco shuts 470,000 tonnes of aluminium capacity as price slump bites

BEIJING – Aluminum Corp of China Ltd, known as Chalco, is cutting output on some of its aluminium production lines in northern China, it said on Friday, as Chinese aluminium prices sank to a fresh two-year low.

China's biggest state-run aluminium producer has decided to make around 470,000 tonnes of annual output at units including Shanxi Huasheng and Shandong Huayu subject to "flexible" output arrangements, a euphemism for production cuts, it said in a statement to the Shanghai Stock Exchange.Chalco said it took the step after considering market conditions and production restrictions required for environmental protection

The reductions are the latest casualty of plunging aluminium prices in China, driven by ample supply and weakening demand, which are leading some smelters to shut in production to avoid financial losses.

Shanghai aluminium prices ended down 0.8 percent at 13,555 yuan ($1,951.68) a tonne on Friday, their lowest close since Sept. 30, 2016. They have shed 13.8 percent so far in 2018 as China's manufacturing sector cools.

The 470,000 tonnes figure accounts for nearly 12 percent of Chalco's 3.93 million tonnes of primary aluminium capacity at the end of 2017, as stated in its latest annual report, which puts Shanxi Huasheng's annual capacity at 240,000 tonnes and Shandong Huayu's at 200,000 tonnes.

The company did not have to cut metal output on environmental grounds in the 2017-18 winter as its smelters are located outside the 28 northern Chinese cities required to place special restrictions on industry during the heating season. It gave no timeframe for the duration of the cuts.

This winter's restrictions on smelting are so far more lenient than the stipulated 30 percent curbs last winter, as cities can determine the extent of the cuts themselves.

($1 = 6.9453 Chinese yuan renminbi)

(By Tom Daly; Editing by Sai Sachin Ravikumar)