China's Aluminum Smelters Cut Output, Exceed Target

China's aluminum smelters, the largest in the world, cut production by more than 10 percent and will limit output until the end of the year because of power shortages and weak export demand, an industry official said.

Producers have exceeded reductions agreed last month and will extend the accord by three months, Wen Xianjun, deputy chairman of China Nonferrous Metal Industry Association.

Aluminum jumped to a record last month on China's production cut, aimed at helping the world's fourth-largest economy combat a sixth year of power shortages.

The 10 percent reduction accord equates to about 3 percent of the nation's production last year. China produced 12.6 million tons of the metal in 2007. Global production was 38 million tons,

Worsening Situation

Higher electricity rates and weakening demand have made some smelters unprofitable. Power accounts for between 30 percent and 40 percent of the costs of an aluminum smelter.

China is grappling with power shortages caused by economic growth that averaged more than 10 percent annually in the past 5 years.

Scuttled Projects

Rio Tinto Group, the world's second-largest aluminum producer, said July 22 that a $3 billion project in Abu Dhabi was ``dead'' because the United Arab Emirates decided not to use its gas supplies to generate power for smelters.

A 16 percent jump in natural-gas prices, used by electricity providers in the Persian Gulf, has persuaded governments in the region to shift the fuel to production of liquefied natural gas instead of aluminum.

The canceled Mideast smelters would have increased world supplies by 2.8 percent. Even with those projects production wouldn't have kept pace with global demand that is growing at 9 percent a year.

Power Shortages

A South African electricity shortage has also curbed smelting this year.

State Grid Corp. of China, the nation's biggest power distributor, warned of ``widespread'' blackouts in Shandong province because of insufficient coal supplies.

China's Hubei province, which has the world's largest hydropower station, has started rationing electricity.

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