China to raise aluminium exports after Guangdong floods

HONG KONG, June 17 (Reuters) - Floods in China's southern Guangdong province and tightening power supply are weakening domestic demand for aluminium, spurring smelters to raise exports, traders and industry sources said on Tuesday.

Guangdong is an aluminium fabricating base in China, the world's top consumer and producer of aluminium. Any unexpected move in exports could drive global prices.

Weak domestic prices are spurring exporters to sell alloyed ingots and billets at low prices, traders said.

"Firms are very keen to export alloyed ingots. One Korean company has contracted 10,000 tonnes per month and an Western trading house got 6,000 tonnes a month," said a trader at an international trading house said.

Chinese aluminium alloy ingot is being offered at nearly flat to cash LME aluminium prices in Asia, compared with spot premiums of about $90 a tonne over the cash price for Western grade primary metal.

China's exports of primary and alloyed aluminium surged 22 percent on the month to 86,669 tonnes in May, according to Customs data. Most of it was believed to be alloyed ingot which does not carry export tax, while primary metal carries 15 percent tax.

Floods in Guangdong, already struggling with power supply problems, were adding pressure on the aluminium market, said a manager at a fabricating plant in Nanhai city, home to dozens of aluminium window and door frame manufacturing plants.

"The flooding should affect aluminium demand. Roads are blocked and purchases of products have been delayed," a manager at a fabricating plant in Nanhai said.

Downpours have affected many cities in Guangdong this month. Guangdong officials warned of a "black June" as high tides, rain and two converging swollen rivers threatened levees, Xinhua news agency said. [ID:nSP279444]

"Fabricators are cutting buying of aluminium. Heavy rain should be affecting house building," a trader in Nanhai said.

Aluminium demand growth has fallen in past few months as Beijing's credit tightness reduced fabricators' cash to buy the metal, traders and aluminium smelter officials said.

The country's weak exports of aluminium-contained products such as bicycles and of semi-finished aluminium products have also slowed the growth.

Fabricators in Nanhai have suffered reduced voltage three times a week since March and used diesel-powered generators to keep up production.

But the fabricators are no longer able to maintain production after local authorities stopped them using such generators from last week, the fabricator manager said. He added this would cut fabricators' demand further.

Benchmark three-month aluminium on the London Metal Exchange has risen 24 percent this year to $2,981 per tonne on Tuesday.

But the three-month Shanghai aluminium contract, currently September , is only up 5 percent at 19,005 yuan.

($1=6.8914 yuan) (Editing by Peter Blackburn)

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