Chalco Shutters Production At Shandong Huayu Aluminium Smelter

Chalco Shutters Production At Shandong Huayu Aluminium Smelter

Blaming the rising cost of electricity in the province, Aluminum Corp of China (Chalco) announced on Wednesday that it is ending aluminium production at its smelter in Shandong.

Chalco said in a statement issued to the Shanghai and Hong Kong stock exchanges that it is implementing “flexible production” at the Shandong Huayu smelter due to “high electricity prices, regional environmental protection policies, market environment and other factors.”

The closure of the plant will drop Chalco’s total production capacity by 200 thousand metric tons per annum, or approximately 5 percent of the firm’s total.

Wednesday’s announcement is likely the product of Shandong’s new fee schedule for captive power plants, by which the lion’s share of Chinese smelters obtain the power to operate. Also contributing to the dire straits faced by Chinese smelters is the drop in domestic demand and prices, both of which are at historic nadirs.

The statement issued on Wednesday said that Chalco is speaking with Shandong Huayu’s other shareholders about “transformation, upgrading and development” at the site. Chalco owns 55 percent of Huayu, but the other shareholders’ identities were not immediately available.

This week’s closure brings Chalco’s total curtailed capacity since the beginning of 2018 to approximately 850 thousand metric tons per annum. The firm shuttered 470 thousand metric tons per annum of capacity at the end of November, 100 thousand metric tons per annum of which is estimated to have been housed at Huayu.

Per Chinese consultancy Baiinfo, Chalco will close another 190 thousand metric tons per annum of capacity by the end of March.

Though Chalco has been shedding capacity of late, the closures have had little effect upon China’s total output of aluminium. The Middle Kingdom smelted a record 3 million metric tons of the metal in December.

Chalco did not respond to a request for comment by Reuters.