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Home - News - Chinalco may shut down some aluminum production as prices fall further

Chinalco may shut down some aluminum production as prices fall further

April 7, 2020

Abstract: Chinalco is the largest state-owned aluminum producer in China, with an aluminum output of 3.79 million tons in 2019, while Chinalco is also the world's largest alumina supplier, producing 13.8 million tons of alumina in 2019.

Beijing, April 3 (Reuters)-Chinalco will consider maintaining or even shutting down some aluminum production facilities and cutting alumina production because of current low aluminum prices, a senior Chinalco executive said on Friday.

Chinalco is China's largest state-owned aluminum producer, producing 3.79 million tons of aluminum in 2019, while Chinalco is also the world's largest supplier of alumina, producing 13.8 million tons of alumina in 2019.

Aluminum prices in Shanghai hit a four-year low of 11250 yuan ($1586.90) a ton on Thursday as supply was plentiful and demand was weak after the coronavirus outbreak.

Wang Jun, Chinalco's chief financial officer, said in an online investor Q & A that Chinalco would consider maintaining some of its production facilities or shutting down all of its production facilities if aluminum prices fell below the company's cash cost, but he did not disclose Chinalco's production costs.

Analysts say the reason for the cut is that most Chinese smelters are losing money at current aluminium prices.

"at present, the company's alumina production capacity has not changed, but with alumina, it is relatively easy to implement flexible production," Wang said. He used an euphemism for production cuts and pointed out that the cost of closing and opening aluminium smelters in this way was too high.

He added: "the company will make adjustments in due course according to changes in alumina prices."

Chinese bauxite prices initially rose after the coronavirus outbreak, as refineries lacked raw materials due to bauxite closures and logistics problems.

However, as China has brought the epidemic under control and transport restrictions have been largely lifted, alumina has been tracking lower aluminium prices, with the average spot price of alumina in China falling to 2246 yuan a tonne on Friday, the lowest level since September 2016, according to SMM.

While this will reduce cost pressure on smelters that buy alumina, a report released by the company last week showed that alumina sales accounted for 21.2% of the company's revenue last year.