China Hongqiao¡¯s aluminium smelter capacity at risk after environmental regulators impose penalty

China Hongqiao, which usurped state-backed Aluminium Corporation of China and Russian oligarch Oleg Deripaska-controlled Rusal in the space of two years to become the world’s largest aluminium smelter last year, has run afoul of Chinese environmental regulations on over half of its capacity.

Shandong province-based Hongqiao, 81 per cent-owned by tycoon Zhang Shiping, has been ordered by the environmental protection watchdog of Zhouping county of Binzhou city, where its facilities are located, to cease production at production lines with combined annual capacity of 3.61 million tonnes.

The reason given for the penalty was “failure to obtain environmental protection approvals before building and operating the facilities”.

The firm was also ordered to stop construction of a 1.32 million tonne-a-year smelting plant, the watchdog said, citing Hongqiao’s failure to seek new environmental impact assessment approval before making major changes to a downstream processing plant.

It was separately told to cease construction of a power plant with 4,800 mega-watts of generating capacity, shut down a 1,320 MW power-and-heat co-generation plant and an alumina refinery, due to failures to obtain environmental approvals.

These actions are according to 11 penalty announcements posted by the bureau on the county government’s website between May 27 and September 23, which said the company is also liable to unspecified fines.

The company expanded its smelting capacity by 29.8 per cent to 5.89 million tonnes in the 12 months to June 30, and chief executive Zhang Bo told reporters in August that it plans to further expand it to 6.5 million tonnes by the end of the year.

Hongqiao has already finished all the rectification work and is waiting for relevant authorities to inspect its facilities before the year-end deadline. The company has spent 1 billion to 1.5 billion yuan annually in the last few years on facilities upgrades to meet environmental standards.

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