Chalco cuts spot alumina prices by 23 pct in China

HONG KONG, Jan 5 (Reuters) - Aluminum Corp of China Ltd, (2600.HK)(601600.SS), the world's third-largest producer of alumina, has reduced its spot alumina prices by 23 percent, after cutting the prices by 38 percent last year. The firm, also known as Chalco, is offering spot alumina at 2,000 yuan ($293) a tonne, from 2,600 yuan at the end of last year, according to its website. (www.chalco.com.cn) The price was still higher than 1,800-1,900 yuan offered by other alumina refineries in China, traders said. The firm cut the price to 2,600 yuan in November, from 4,200 yuan at the beginning of last year, in 4 steps. "We cut the price from Jan 2 to reflect prices in the spot market," a Chalco official said. "We don't have much spot materials to sell as we have cut alumina production." The official said aluminium smelters in China had reduced production, cutting demand for alumina, the main raw material for production of the metal. Chalco had temporarily shut a total of 4.11 million tonnes of alumina capacity, 38 percent of its total, since November. The shutdown comes after Chalco temporarily closed 720,000 tonnes of alumina smelting capacity in China from October due to low prices and weak demand. About two tonnes of alumina are needed for one tonne of primary aluminium. About 4 million tonnes of existing aluminium smelting capacity in China is estimated to have stopped production since the second half of last year. Another 4 million tonnes of new capacity has not started production, even though the capacity is already built, smelter officials said. About 11 million tonnes of capacity is estimated to be operating, out of a total of 19 million tonnes of capacity in China. But the reductions are unlikely to expand in the near future, given falling production costs such as alumina, coal and electricity, smelter officials said. Market conditions for aluminium are also improving after the State Reserves Bureau bought 290,000 tonnes of the metal from 8 smelters as national reserve last month. ($1=6.83 yuan)