* Some 30 pct of capacity may be forced to leave mkt in 3
yrs -China Hongqiao CEO
* Says about half smelters making losses due to low domestic
* But Hongqiao to increase aluminium, alumina output this
* Says talking to Rio Tinto about bauxite supplies
By Polly Yam
HONG KONG, March 17 Major aluminium producer
China Hongqiao Group Limited expects its production to
rise by about 20 percent this year even as overcapacity could
force some smaller producers into bankruptcy.
Low domestic prices are cutting into cash at smaller firms,
China Hongqiao Chief Executive Officer Zhang Bo said, adding
that large smelters which own power plants were still making
profits due to weak coal prices.
Electricity typically accounts for about 40 percent of
aluminium production costs in China.
"In the coming three years, at least about 30 percent of
capacity (will be forced to leave the market)," Zhang said at a
media briefing in Hong Kong on Monday.
China currently has about 30 million tonnes of aluminium
capacity of which 27 million tonnes is operating, Zhang
He said that about half of the operational capacity was
making losses due to low prices.
Beijing has for years tried to tackle the problem of
overcapacity in aluminium and other industries, but the new
government of President Xi Jinping has made it a priority.
Spot aluminium AL-A00-CCNMM traded below 13,000 yuan
($2,100) per tonne this month - its lowest since mid-2009. It
has dropped about 30 percent from a record high in July 2011.
About half a million tonnes of capacity has already closed
so far this year, with more expected to shut in coming months.
Banks in China have also cut loans to industries suffering
from overcapacity, hitting small smelters in particular, Zhang
China Hongqiao's aluminium capacity surged by 46 percent
year-on-year to 2.96 million tonnes in 2013. That will boost the
firm's aluminium production to about 2.9 million tonnes in 2014
from about 2.4 million tonnes last year, Zhang said.
The company is also planning to bring another 1 million
tonnes of capacity online for producing alumina, which is used
to make aluminium.
That would boost alumina output to near 4 million tonnes in
2014 from about 3 million tonnes last year.
Zhang said the firm was in talks with global miner Rio Tinto
to supply bauxite, the ore used for alumina production.
He declined to give further details.
The firm is also building a $1 billion alumina project with
2 million tonnes of capacity in Indonesia. The first phase, with
1 million tonnes of capacity, will start production in October
($1 = 6.1502 Chinese Yuan)