China offers 15 aluminium smelters cheaper power

By Polly Yam

HONG KONG, March 6 (Reuters) - China has allowed 15
aluminium smelters to negotiate lower electricity fees with
power plants and power grids, a move which may help cut
smelters' production costs by more than 1 percent and spur more
output.

The 15 smelters, which account for more than one-fifth of
the total aluminium smelting capacity in China, the world's top
producer of the metal, were selected for a pilot plan to
increase the utilisation of electricity, a statement on the
website (www.serc.gov.cn) of State Electricity Regulatory
Commission said on Friday.

The new rates would be lower than prices set by Beijing,
smelter officials and analysts said.

The move is part of the government's effort to shore up
unprofitable smelters at a time of anaemic demand, industry
sources say.

The aluminium industry, which uses around 6 percent of the
country's electricity output, has cut back production due to
weak demand, reducing consumption of electricity.

The smelters, which use about 58 billion kilowatt-hours of
electricity a year, would be negotiating with separate power
firms for electricity fees and regional grids for charges that
are paid to allow the electricity to pass through their
networks to the smelters, a manager at one of the smelters
said.

"Smelters are excited about it and would start talks as
soon as possible," the manager said.

He added the rates to be settled between smelters and power
firms and grids were required approvals from the electricity
commission and the National Development and Reform Commission.

Currently, the average production cost to smelters in China
is estimated at about 12,500 yuan per tonne.

"The policy could cut the smelters' production costs by
200-300 yuan per tonne," an analyst at Antaike, a state-owned
research group, said.

"The cut would be very useful to smelters as they use a lot
of electricity."

Below is the list of the smelters with combined capacity of
about 4.15 million tonnes of primary aluminium a year, provided
by smelter sources.
Smelter
Fushun Aluminium
Yunnan Aluminium 000807.SZ
Shanxi Guanlu 000831.SZ
Chalco's (2600.HK)(601600.SS) Liancheng Aluminium
Chalco's Shandong plant
Chalco's Guizhou plant
Chalco's Guangxi plant
Chalco's Qinghai plant
Shanxi Huaxing Aluminium
Gansu Hualu Aluminium
Baotou Aluminium
Aostar Aluminium
Shaanxi Tongchuan
Qingtongxia Aluminium
Sichuan Guangyuan Qimingxing
(Editing by Ben Tan)