Per an announcement made yesterday by corporate officials, People’s Republic of China aluminium producer Henan Zhongfu Industrial has opted to shutter a 250-thousand-metric-ton-per-annum aluminium smelter in the province, sending the production capacity southwest to Sichuan province.
The capacity, operated by subsidiary Linfeng Aluminum has already been suspended. According to a statement submitted late Wednesday to the Shanghai Stock Exchange, the capacity will be sent to a “cost-competitive region” which was not yet identified by the firm. The statement revealed that the move will result in an impairment charge of between CN￥600 million and CN￥700 million (US$87.2 million and US$101.7 million)
According to the company official who spoke to the press yesterday, the capacity accounts for around 30 percent of the firm’s total and will be rehoused in the city of Guangyuan. No timetable for the move was given, however.
Henan Zhongfu indicated that the move is the result of the subsidiary “facing relatively large pressure on production operations” in Linzhou. Though the firm did not specify, Chinese smelters have uniformly felt the pressure of rising overhead, including spiking coal prices, squeezing out already thin margins.
Though the state has the final say in firms’ addition of new aluminium production capacity, it allows smelters to transfer or buy capacity in areas where total output is below fixed output maximums. Several Chinese firms have begun to add or transfer capacity in southern regions like Sichuan due to the twin advantages of no winter cuts in production and an abundance of cheap hydropower.
Henan is among the areas targeted by Beijing for winter cuts due to concerns over diminished air quality during the winter heating months. Though this year’s cuts are not nearly as significant and sweeping as last year’s mandatory 30-percent curtailments, some cities have still opted to clamp down on production over all or some portion of the mid-November to mid-March winter heating season.