Chalco cuts back alumina production

Chalco, the world's third largest alumina producer, is shutting a further 1 million tonnes of production at its Shandong plant, a company source said, which could trim China's output by around five per cent.

On top of 300,000 tonnes stopped earlier, the closure is equal to about 10 per cent of capacity at Chalco, or Aluminum Corp of China Ltd, but may not be big enough to push up prices as demand for the product slumps.

Aluminium use in industries such as construction, packaging and car-making has slowed down with the global economy in recent months, dragging down prices for alumina, the main raw material.

"This may not cause alumina prices to rise significantly given the weak demand," Geoffrey Cheng, a Hong Kong-based analyst at Daiwa Securities, said. "The alumina industry in China should consider cutting output to below last year's output."

The closure would leave the Shandong plant running at about 200,000 tonnes out of 1.5 million tonnes of capacity.

"Shandong's output plan for the fourth quarter is set at just 45,000 tonnes," the company source said.

Chalco's board secretary Liu Qing said the firm was watching the aluminium and alumina markets and might fine-tune production, without giving details.

Zhang Qing, the firm's investor relations manager, said last Friday Chalco was considering shutting high-cost aluminium capacity because of weak metal prices, a move that will cut its own demand for alumina.

Chalco's shares were 5.2 per cent lower in Hong Kong versus a five per cent fall for the broader index, and three per cent lower in Shanghai at the close.

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