China's Yunnan begins aluminium production cuts as dry season begins

Credit: REUTERS/China Stringer Network

BEIJING, Nov 1 (Reuters) - Chinese aluminium smelters in southwestern Yunnan province started cutting a total of 1.15 million metric tons of capacity this week, to comply with curbs expected to last until April, a smelter manager and two analysts said.

The curb, issued by China Southern Power Grid on Oct. 30, asked local producers to cut their production by between 9% and 40% of capacity, according to Li Lin, aluminium director at AZ Consulting.

Yunnan, with around 5.7 million tons of capacity, is the fourth biggest aluminium producing region in China and accounts for around 12% of the country's total capacity.

Aluminium capacity has been growing in the region in recent years, benefiting from cheap hydropower, but water shortages are now taking their toll of the total output.

The smelters cut their production last September and only resumed in late June.

Smelters are expected to complete the latest production cuts by Nov. 5, which would reduce 1.15 million metric tons capacity, Li said.

China Southern Power Grid was not immediately reachable for comments.

Major aluminium producers located in Yunnan include Yunnan Aluminium 000807.SZ, China Hongqiao Group 1378.HK and Yunnan Shenhuo Aluminium and Qiya Group.

A manager at one of the producers told Reuters they had started to cut production on Wednesday and that the curb would last until the rainy season begins next year.

The person declined to be named because they were not authorised to speak to the media.

A person from the chairman's office at Henan Shenhuo Coal & Power 000933.SZ, the parent company of Yunnan Shenhuo, told Reuters on Wednesday operations in Yunnan were running normally.

The other companies did not respond to requests for comment.

Yunnan's dry season typically runs from November to April.

(Reporting by Siyi Liu, Dominique Patton and Beijing Newsroom; editing by Miral Fahmy)

((Siyi.Liu@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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