HONG KONG - Henan Hongkong Longquan Aluminum Co., China's third-largest aluminium smelter, is in talks to buy 49 to 50 percent of alumina producer Cayman Aluminium (Sanmenxia) Co., officials from both firms said on Monday.
In return, Cayman Aluminium would take a similar stake in the aluminium smelter.
Hongkong Longquan may thus stop importing and buying alumina, the raw material for aluminium, from Chinese suppliers such as Aluminum Corp. of China Ltd. , the world's second-largest alumina producer, as soon as next year.
"We are going to sign an agreement soon," an official with Hongkong Longquan told Reuters, adding that the two firms were negotiating the size of the stakes and price.
Both firms are located in central Henan province.
The provincial government encouraged large aluminium producers in Henan to invest in local alumina plants, to secure supply of the material, the official said. ADVERTISEMENT
Hongkong Longquan had annual capacity of 400,000 tonnes of primary aluminium and two power plants, which fully covered the smelter's electricity needs.
But the official said the firm would produce 400,000 tonnes of aluminium this year, up a third from about 300,000 tonnes in 2005. Alumina supply shortages had reduced the firm's metal output last year.
The firm consumes 800,000 tonnes of alumina annually, and has to buy the material from Chinese and overseas suppliers.
Meanwhile, Cayman plans to expand its annual alumina capacity to 1.2 million tonnes as soon as by March 2007, from 800,000 tonnes currently, an official for its parent, Hangzhou Jinjiang Group, said from its headquarters in eastern Zhejiang province.
He said Cayman would produce about 400,000 tonnes of alumina this year because it started production at a second 400,000-tonne facility at the refinery only last month.
The first 400,000-tonne facility began production in the first quarter this year.
Cayman would produce more than 1 million tonnes of alumina in 2007, he said.
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