State-run smelter Aluminum Corp of China (Chalco) announced to the Hong Kong stock exchange on Thursday that high bauxite prices and low alumina prices have forced it to curtail alumina production on certain production lines in Shanxi.
Terming the move as instituting “flexible” production status, the firm indicated that around 770 thousand metric tons per annum of capacity would be subject to cuts at its Shanxi New Material.
“As affected by the market environment and other factors, the cost of bauxite in Shanxi continues to rise, while the market price of alumina keeps low,” said the company in a statement filed with the exchange. Chalco continued by saying that the cuts went into effect concurrently with the announcement on Thursday.
Per the announcement, Shanxi New Material has a nameplate refining capacity of 2.6 million metric tons per annum. However, the site produced only 1.86 million metric tons of the aluminium precursor last year.
Shanxi province has been the site of particularly significant attention to illegal bauxite mining in recent months, with has translated in a lean market for alumina. Such a situation is uniquely problematic for the province, which is China’s second-most-prolific producer of alumina.
The situation has not been helped by a weak market for alumina, which sits at CNY2,700 per metric ton a week ago today. The price represents the lowest since a previous nadir in August last year.
The international market has also taken its toll on domestic supply, with prices internationally high enough to tease out exports of alumina through trading houses two months ago. Chalco’s head Lu Dongliang predicted at the time that exports would likely add additional pressure to the domestic market.
Chalco is among China’s top alumina refiners, as it reported a company-wide refining capacity of 16.86 million metric tons in its 2017 year-end report.