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China Aluminum Smelters Restart as Power Returns, CRU Says

March 31 (Bloomberg) -- Most of the aluminum-production capacity in China that was halted on power curbs last year has been restarted, according to researcher CRU International Ltd., boosting output in the world’s largest consumer of the metal.

About 1 million metric tons of annual smelting capacity has resumed output and a further 200,000 tons may return soon, said Wan Ling, a Beijing-based aluminum analyst. Some 400,000 tons of capacity may not be restarted, she said.

China’s production of aluminum slumped last September to the lowest level since July 2009 as local governments reduced electricity supplies to power-intensive industries to meet an energy-efficiency target. Wan said in January about 1.6 million tons of capacity had been shut since July.

“Output in March may rise by 3 percent to 5 percent from February,” Eric Zhang, an analyst at data provider Shanghai Metals Market, said by phone today. The output data will be released by the National Bureau of Statistics next month.

Aluminum output in February increased to 1.31 million tons from January’s 1.30 million, according to statistics bureau figures. Over the first two months of 2011, production fell 1.6 percent compared with the year-ago period. Output last September dropped to 1.17 million tons, statistics bureau figures show.

Three-month aluminum on the London Metal Exchange has gained 7.1 percent this year, and climbed 0.6 percent to $2,645 per ton at 3:51 p.m. in Shanghai today. The metal for June delivery on the Shanghai Futures Exchange, or SHFE, closed 0.4 percent lower at 16,775 yuan ($2,561) per ton.

Half the Cost

Energy accounts for as much as half the cost of making aluminum, which is used in window frames and beverage cans. China’s efficiency drive aimed to reduce energy consumption per unit of gross domestic product, cutting so-called energy intensity by 20 percent in the five years to December 2010.

Aluminum stockpiles in SHFE-monitored warehouses declined to 411,438 tons last week, the lowest level since April 2, 2010, data from the bourse show. The reserves have dropped 17 percent since reaching 498,068 tons in the week to June 11, 2010 as users drew down inventories as monthly production declined.

Aluminum “consumption is quite good now, matching the seasonal peak in November,” Wan said.

China’s so-called actual aluminum demand may expand 8.7 percent to 18.21 million tons in 2011, down from growth of 20 percent last year because of a slowdown in the construction and automobile sectors, according to CRU.

The price of the metal may climb to as high as $2,800 a ton as a shortfall drains SHFE stockpiles, Macquarie Bank Ltd. said in a research report on March 7. “Even a strong ramp up in supply is set to see the Chinese market in deficit through at least March and April,” said the analysts led by Max Layton.

To contact the Bloomberg News staff on this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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