China Emeishan Aluminium cuts output by one third on weak demand

China's Emeishan Aluminium Works in Sichuan province has reduced metal production by about one third of its 150,000 mt/year capacity since October on the back of falling ingot prices, a company source said Wednesday. "Consumption demand is very, very weak and is expected to weaken further as we near the Chinese New Year period [in February 2009]. At year-end, prices are also expected to lower further as people try to sell as much as they can in exchange for cash flow," the source said.

"We have cut output to cut losses, but we cannot cut any more as it is very costly to restart idle machines," he added. The company now expects to produce only about 100,000 mt in 2008, down from 150,000 mt in 2007. "Production costs have fallen recently on lower alumina prices, but ingot prices have also fallen, so most smelters are either at cost now or making losses," the source said.

"Market sentiment is very weak ... some people are saying prices will even fall to around Yuan 12,000/mt soon, with some even expecting a more drastic Yuan 11,000/mt," he added.

The nearest November contract on the Shanghai Futures Exchange closed at Yuan 13,585/mt ($1,989) Wednesday.

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