Earthquake's Impact on Aluminium Smelters Still to Be Calculated

SHANGHAI (Interfax-China) -- Damaged facilities and disrupted power supplies are expected to affect aluminium smelters in earthquake-hit areas of Sichuan Province, though broken communication lines have made it difficult to calculate the degree of impact, analysts told Interfax today.

According to State Grid, six transformer substations were shut down, reducing power supply to the Sichuan power grid by 4 million kilovolts after a 500-KV and five 220-KV transformer substations in Sichuan were affected by the earthquake. In addition, five power plants in western Sichuan were disconnected from the power grid.

"Any possible structural damage to facilities or power cuts will heavily impact aluminium production. Sichuan Meishan Aostar Aluminum Co. Ltd. (Meishan Aostar) and Sichuan Guangyuan Aostar Aluminum Co. Ltd., in Sichuan's Meishan City and Guangyuan City close to Wenchuan County, are likely to be affected," Huang Fulong, an analyst at Kaichao Investment Bank, said.

"Communication in those areas struck by the earthquake was cut though, making it impossible to receive up-to-date information," Huang said.

"Although the possible impact of the earthquake has not yet been confirmed, an aluminium smelter in Sichuan said the affect on production is minimal. However, the current lack of direct communication to the earthquake affected areas prevents us from confirming the information, and all we can do is wait and see if smelters have cut production or shut down altogether," Li Yang, an analyst with Beijing Antaike Information, said today.

"Domestic aluminium prices, which may temporarily go up due to the disruption, are not expected to be affected in the long term as long as there are no major production cuts or halts," Li said.

When contacted by Interfax, a Bosai Minerals Group official based in Nanchuan county, Chongqing Municipality, who asked to remain anonymous, said "Nanchuan experienced slight tremors yesterday afternoon, but it did not impact operation However, we have been trying to get in touch with our smelter in Aba Prefecture, Wenchuan county, and this morning sent out search parties to make contact with the smelter."

Bosai's Aba Aluminum Smelter is set to attain an annual production capacity of 200,000 tonnes of aluminium this year, and expects to produce 150,000 tonnes of aluminium. Chongqing-based Bosai, a bauxite miner and alumina smelter, acquired Aba Aluminum in 2006.

China's strongest earthquake in more than three decades hit Wenchuan County at 14:28 Beijing time yesterday, killing more than 11,900 in towns and cities in Sichuan Province and its surrounds. Casualties are expected to rise rapidly. Wenchuan County is about 100 kilometers northwest of Chengdu, the capital city of Sichuan.

Meishan Aostar had just resumed normal production on April 25 at its aluminium smelting lines in Sichuan. It had shut down 84 electrolytic anodes earlier this year after local power transmission infrastructure was damaged and partly shut down during the heavy snowstorms at the beginning of the year. The company's primary aluminium capacity stands at about 280,000 tonnes per annum.

The most-traded July aluminium contracts on Shanghai Futures Exchange closed at RMB 18,915 ($2,709.89) today, up 0.53% from the previous trading day, while the spot aluminium prices today on the Shanghai market were between RMB 18,450 ($2,639.98) and RMB 18,470 ($2,642.84) per tonne, up RMB 20 ($2.86) from yesterday.

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