China alumina refineries shut some capacity on prices

HONG KONG, Oct 13 - Alumina refineries in China are shutting down some high-cost capacity as prices fall, refinery sources said on Monday. Falling production could reduce China's imports of bauxite, which is used to produce alumina, the main material for aluminium production. The stepscome as aluminium smelters mull output cuts to save money at loss-making plants. China, producer of a quarter of the world's alumina, imports about a third of its bauxite needs. China's top two bauxite suppliers are Indonesia and Australia. Lubei Group is closing its 1-million-tonne-a-year alumina refinery in Shandong province, which uses imported bauxite as feed, a senior executive at the refinery said. "We are going to close all production," the executive said. He added the period of closure was uncertain and depended on market conditions. Weiqiao Aluminium, the second-largest alumina producer in China after Chalco <2600.HK>, has shut half of its 4-million-tonne-a-year alumina facility in the past month, a trader at the firm in Shandong said. He added current spot alumina prices were below its production costs of 3,300 yuan a tonne. He said the firm, which also uses imported bauxite as feed, was using most of the current alumina production for its primary aluminium production, while chopping alumina supply to the domestic spot market. Two tonnes of alumina are needed for the production of one tonne of primary aluminium. Spot alumina prices in China have fallen nearly 40 percent so far this year to about 2,650 yuan per tonne because of increased supply from new capacity, which surpassed demand growth from the production of primary aluminium, sources at aluminium smelters and alumina refineries said. Weak prices of primary aluminium, which has fallen 5 percent this year in international markets and 22 percent <0#SAF:> in China, also pulled down Chinese alumina prices. Aluminum Corp of China Ltd <2600.HK><601600.SS>, the world's third-largest alumina producer, has cut its spot alumina prices in China three times so far this year by a combined 31 percent to 2,900 yuan a tonne, according to the firm's website. Chalco's alumina and aluminium subsidiary in Shandong has also shut an alumina facility with annual capacity of 300,000 tonnes this month, an official at the Shandong plant said. The closure may extend to the plant's other 1.2 million tonnes of alumina capacity if prices maintain weak, the official said. The Shandong plant imports most of the bauxite it needs. Analysts expect China to produce more than 24 million tonnes of alumina this year, up from 19.5 million tonnes last year. But the closures could make the country's production fall short of the expected level, though refineries that use cheaper locally produced bauxite are still running nearly full operations, the sources said. China imported 18.7 million tonnes of bauxite in the first eight months of this year, up 21 percent from a year before. Source: Reuters