Chalco Suspends Aluminum Smelter in Shanxi on Power

By Xiao Yu

July 7 (Bloomberg) -- Aluminum Corp. of China Ltd., the nation's biggest producer of the metal, halted production at a venture in the northern province of Shanxi because of a power shortage.

The provincial government ordered smelters to cut capacity to ensure power supply for farming, Wang Suomin, a manager at the Shanxi Huaze Aluminum & Power Co. venture, said by phone today. The venture has an annual capacity of 280,000 metric tons.

Power shortages may have halted 700,000 tons of capacity in Shanxi, research company CBI China Co. said today. That's nearly 5 percent of national output in the world's largest producer. Global aluminum prices have rallied 31 percent this year after snowstorms in China curbed output.

``This will boost aluminum prices,'' Le Yukun, an analyst at BOC International Ltd., said by phone from Shanghai. ``Power shortages may spread and worsen, forcing more output cuts.''

Aluminum for three month delivery gained 0.4 percent to trade at $3,172 a ton on the London Metal Exchange at 11:30 a.m. Beijing time. The metal rose 0.1 percent to trade at 19,385 yuan on the Shanghai Futures Exchange.

China's summer power shortfall will reach 16 gigawatts, the state-run China Daily reported on July 1, citing the electricity regulator. The country is in its sixth year of power shortages.

There is a power shortage in the Shanxi province, said Zhang Qing, a spokeswoman with Beijing-based Aluminum Corp, better known as Chalco. Zhang said she couldn't comment on what's happening with production.

Huaze's Wang didn't give a loss estimate at the venture, which is between Chalco and Shanxi Zhangze Electric Power Co.

The Shanxi provincial government ordered smelters to cut capacity by 50 percent, CBI analyst Eric Zhang said today. CBI didn't name smelters affected.

China is the world's largest producer of aluminum, which is used in aircraft and cars, with a total capacity of more than 15 million tons.

To contact the reporter on this story: Xiao Yu in Beijing at yxiao@bloomberg.net.