Rio Says China’s Aluminum Smelters Utilization Gains

By Kyunghee Park

May 18 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, said the utilization rates of aluminum smelters in China “improved” to almost 66 percent in April.

Demand continues to remain weak, so prices are “under pressure” because of concerns about overcapacity, Anthony Loo, head of the company’s China unit, said in Hong Kong at a conference. He didn’t give a comparison for utilization rates.

China, the world’s largest aluminum producer, may have restarted as much as 1.4 million metric tons of idled capacity in April, an analyst at Aluminum Corp. of China Ltd. said May 13. Alcoa Inc., the largest U.S. aluminum producer, last week said there is still “significant oversupply” in the global market and restarts by Chinese smelters aren’t needed.

The Chinese “authorities have said they would buy the metal if prizes fall below a certain price,” Loo said. “From what we have heard, no stockpiling has taken place as prices haven’t fallen below that certain price.” He didn’t give details.

Aluminum futures in Shanghai dropped 0.7 percent to 12,690 Yuan ($1,859) a ton at 11:01 a.m. local time. Prices have rallied 11 percent this year after the government bought excess metal to support domestic producers.

Aluminum Purchases

China’s State Reserve Bureau should hold back from more purchases of aluminum unless prices drop below 11,000 yuan a ton, Wen Xianjun, deputy head of the China Nonferrous Metals Industry Association said May 12. More purchases would only encourage higher production, which would depress prices, he said.

The Chinese automobile and home appliances industries haven’t significantly raised copper consumption, though their increased purchases of steel suggests that copper demand will also improve, Loo said.

Copper demand in the real estate industry remains “weak” at the moment, he said.

Chinese copper imports jumped in the first quarter because of the shortage of scrap and reduced smelter production, he said. Imports by China, the world’s largest consumer, rose to a record for a third month in April, according to customs data last week.

To contact the reporter on this story: Kyunghee Park in Hong Kong at kpark3@bloomberg.net