China's Aluminum Smelters Said to Meet to Discuss Cutbacks

Updated on
  • 14 companies including Hongqiao, Chalco to gather Thursday
  • Copper, nickel and zinc producers have already announced cuts

Aluminum smelters in China, which contributes about 40 percent of global output, plan to gather on Thursday to discuss their response to a slump in prices to six-year lows, according to people with knowledge of the matter.

The 14 smelters, including China’s biggest, China Hongqiao Group Co. and Aluminum Corp. of China Ltd., or Chalco, will meet in the southwestern city of Kunming, the people said, declining to be identified because the gathering is private. The companies will discuss cutting production among other measures, the people said, although there is no guarantee that any action will be taken.

The meeting would follow similar gatherings of China’s copper, nickel and zinc producers held in the past month, all of which led to pledges of output cuts to support markets. China’s slowest growth in a generation has prompted a broad collapse in metals prices.

Aluminum for delivery in three months rose as much as 1.8 percent on the London Metal Exchange and traded at $1,499 a metric ton by 1:55 p.m. The metal has fallen 24 percent in the past year as supply glut from China overwhelmed global demand.

More than 60 percent of China’s aluminum capacity suffers negative cash flow, Beijing Antaike Information Development Co. said in a note last month. The research company expects China to idle 5 million metric tons of capacity by the end of the year - about 10 percent of its total - and for smelters to delay new capacity, according to a separate note.

A person who answered a call to Hongqiao’s board office declined to comment on the meeting and wouldn’t to provide her name as per company policy. Calls to Chalco’s board office weren’t answered.

China has already signaled it’s prepared to curb aluminum production to try to stem oversupply as part of an agreement with Russia. The Sino-Russian protocol on energy cooperation, signed Nov. 16 by Russian Deputy Prime Minister Arkady Dvorkovich and Chinese Vice Premier Zhang Gaoli, includes a section on bringing aluminum output into line with demand, according to a copy of the document obtained by Bloomberg News.

— With assistance by Alfred Cang

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