Chalco may reduce staff in Guangxi due to high costs

The Guangxi branch of Aluminum Corporation of China, also known as Chalco, will have to lay off half of its 3,000 workers without help from the provincial government, said Liu Yonggang, the company's general manager.

That was the message he tried to get through to Guanxi party chief Guo Shengkun at the provincial people's congress, which will finish on Jan 14.

"Only when our spending on electricity is lower than 32 percent of the cost of aluminum production will we be able to stay in business," Liu said.

China's aluminum industry took a hard blow from the global economic downturn. The price of aluminum fluctuated widely in 2008 from 19,000 yuan ($2,778) a ton to 10,500 yuan. Liu said that the current price at around 12,000 yuan is not enough for smelters to make a profit. Liu said that his company has already cut its output by more than 60 percent.

Because the production of aluminum is very energy-intensive, reducing electricity price can help smelters stay afloat in these hard times. Energy accounts for more than 40 percent of the total production cost of aluminum.

While seeking help from the government, Liu also said that if the price for aluminum can bounce back to 14,000 yuan for each ton in 2009, his company will be able to resume production without posting losses. Liu's company is capable of producing 150,000 ton of aluminum each year.

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