Aluminium output growth slowing down
By Simon Casey (Bloomberg News)
Updated: 2005-09-29 08:35

China's aluminium industry, the world's largest, is expanding at a slower rate after tax breaks were ended and lending tightened, said the Chinese Nonferrous Metals Industry Association, which implements government policy.

The nation's output of the lightweight metal used in cars and aircraft will grow 15 per cent this year to 7.7 million metric tons, said Pan Jiazhu, vice-president of the association. That compares with an average annual increase over the last five years of 21 per cent, said Pan, speaking on Tuesday in Atlanta at Metal Bulletin's International Aluminium Conference.

China is trying to slow the expansion of its aluminium industry to conserve energy and improve efficiency. The industry uses 4.4 per cent of the nation's electricity, Pan said. Eighty per cent of Chinese aluminium producers are unprofitable, said Macquarie Bank in a report last month, citing government data.

The forecast is higher than an August growth estimate of 10 per cent made by Wang Gongmin, deputy chairman of the association. China's aluminium production in the first eight months of the year rose 21 per cent from a year earlier to 4.8 million tons, according to the Beijing-based National Bureau of Statistics.

China will next month announce guidelines to curb capacity expansion and rein in exports of the lightweight metal, Wang Feihong, an analyst with Beijing Antaike Information Development Co said in an interview. The guidelines will include minimum capacity requirements for new aluminium projects, according to Wang, who has seen a copy of the guidelines. Antaike is a research affiliate of the association.

The government has limited credit available to aluminium producers and tightened planning regulations for new plants. Pan said the government would formalize the abolition of tax exemptions next month for producers who import raw materials and export finished metal, a process known as "tolling."

Chinese aluminium exports will shrink as the rate of production growth slows while domestic demand rises, Pan said. Usage will total 6.8 million tons this year, leaving a surplus for export of 900,000 tons. By 2010 consumption will have increased to 10.5 million tons, beating China's output by 600,000 tons.

Imports of aluminium will drop in the next five years as companies such as Aluminium Corp of China Ltd, also known as Chalco, boost output and reduce the nation's reliance on sales from foreign companies. China's output of the raw material used to make aluminium will grow to 16.8 million tons in 2010 compared with 8.2 million tons this year, Pan said.

(China Daily 09/29/2005 page11)

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