China aluminium smelters vow to cut capacity by 500,000 T by year-end

China's top aluminium smelters will reduce capacity by 500,000 tonnes by year-end, taking total capacity cuts for 2015 to just under 5 million tonnes in a bid to whittle down a domestic supply glut, a major trade association said on Friday, December 11.

In a statement following a meeting of 14 major producers including Aluminium Corp of China (Chalco) in Yunnan province on Thursday, China's Nonferrous Metals Industry Association (CNIA) said the producers had also pledged not to open any new capacity for at least one year or to reopen any idled capacity.

China's metals industry has been blighted by overcapacity as the world's No.2 economy slows, sending international prices plunging, with benchmark aluminium down by a quarter since May.

Some 4.41 million tonnes of capacity has been cut so far in 2015, easing the supply glut, CNIA said. Domestic inventory has fallen by 200,000 tonnes since October to 800,000 tonnes, it said.

Aluminium prices in Shanghai extended gains briefly after the CNIA announcement on Friday before returning to their earlier levels as traders and analysts were sceptical that the moves would make a dent in global inventory estimated at 14 million tonnes.

While China has shuttered old, outdated equipment this year, leading to these cuts, smelters have also opened swathes of new capacity. Analyst estimates range between 2 million tonnes and 5 million tonnes.

The CNIA statement, issued on behalf of the 14 smelters at the meeting, listed 41 companies it said would have cut a total of 4.91 million tonnes of annual capacity by the end of the year.

The list did not include China Hongqiao Group which announced plans to cut 250,000 tonnes of annual output on Thursday.

It follows moves over the past month by China's copper, zinc and nickel industries to try and boost prices in the world's top metals producer.

China's state stockpiler was considering buying more than 1 million tonnes of aluminium from local smelters, Reuters reported in late November, an initial sign that Beijing could agree to the first major bailout in its embattled metals industry since 2009.

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