Henan’s Luoyang Xiangjiang Wanji Aluminium announced yesterday that it has curtailed 30 percent of its aluminium and alumina capacity as a response to Beijing’s campaign to reduce smog over the winter months.
According to a source from the refinery who spoke to S&P Global Platts, the capacity cuts went into effect yesterday.
“We just started the cuts today, and will not resume until after March 15 next year, which is what the government requires. It’s too early for prices to be impacted yet, as the market will need a few days to see who else confirms cuts and how much has been cut.”
Though the refinery can produce a volume of up to 1.4 million metric tons per annum, it turned out 1.2 million metric tons last year. The facility was hampered last year in part due to a breach in the red mud storage facility in August.
The smelter source indicated that restoration of capacity would depend upon market conditions next spring.
“We started the cuts today and should complete all 30% within a week. When we resume will depend on market conditions at the time after mid-March next year. If prices are good, we’ll restart quickly, else we might wait a while.”
He went on to say that the overall market for alumina is likely to hinge upon the success or failure of capacity cuts over the next few months.
“But in general, we expect most of the required cuts will happen. The government is very strict and there are inspections almost every day, so the cuts will have to happen,” he concluded.