China Henan aluminium firms face power cuts

Aluminium smelters in China's Henan province, which account for a fifth of capacity in the world's top producer of the metal, face power cuts as a coal shortage threatens electricity generation, smelter officials said on Monday.

China's power shortages so far have affected aluminium smelters only in Henan and could improve from mid-February as the winter wanes, said Wen Xianjun, vice chairman of the China Nonferrous Metals Industry Association.

But the possible production cuts in Henan pushed up Shanghai's aluminium prices 4.1 percent on Monday. London Metal Exchange aluminium prices reacted mildly, rising 0.5 in two hours to $2,345 per tonne at 1053 GMT.

"It would definitely have an impact on the market," said David Thurtell, an analyst at Citigroup, of potential power cuts to Henan's smelters. "You could easily see some more short-covering on the back of that story."

Regions like Henan in central and southwest China face reduced electricity supplies after demand jumped because of freezing weather in January that led to coal shortfalls, the State Grid Corp of China (SGCC) said last week.

"The power bureau asked us on Sunday to prepare for production cuts at our smelter since the local power supply is tightening," an administration official at a large smelter in Henan told Reuters.

"I can imagine they called others," said the official, who declined to be named.

A manager at another large smelter in Henan said the company had received calls from the local power operator on Sunday and Monday warning about power supply cuts.

"Their calls to smelters reflect that they are nervous about power supplies," the manager, who declined to be named, said.

Henan had power shortages of 3 GW or some 10 percent of its peak in late 2009, according to the local grid. Coal stocks in major power plants were enough for seven days as of Sunday.

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