Aluminum Producers in Henan Province Cut Production, Industry Group Says

Aluminum producers in Henan province, the largest maker of the metal in China, agreed to curtail 700,000 metric tons of capacity, a metals association official said, confirming a Xinhua News Agency report.

The province’s 13 producers jointly agreed to cut output from the middle of this month, state-run Xinhua said June 25, citing the local nonferrous metals association. Higher power tariff have made smelters unprofitable, the report said.

“The Xinhua’s report is true,” Wen Xianjun, the deputy head of China Nonferrous Metals Industry Association, said today by phone from Beijing, without elaborating.

The Chinese government raised power surcharges for some smelters by as much as 100 percent from June to curb overcapacity in the world’s largest producer of the metal. The higher costs may affect 1 million tons of smelting capacity, or 6 percent of the country’s total, Aluminum Corp. of China Ltd., the nation’s biggest producer, said on May 20.

Aluminum prices in China have dropped below the cost of production, putting pressure on smelters to reduce output, Luo Jianchuan, president of Aluminum Corp. of China, said on June 8.

The average production cost of Chinese aluminum smelters is 15,300 yuan ($2,251) a ton, according to CRU International Ltd. Aluminum futures in Shanghai rose 0.6 percent to close at 14,915 yuan a ton.

--Xiao Yu. With assistance from Glenys Sim in Singapore. Editors: Tan Hwee Ann, Indranil Ghosh.

To contact the Bloomberg News staff on this story: Xiao Yu in Shanghai at yxiao@bloomberg.net;