UPDATE 1-Power shortages ease in China's Shanxi, Liaoning

(Adds details, impact on metal firms)

BEIJING, Aug 18 (Reuters) - Top thermal power plants in China's Shanxi province, a major aluminium producer, have resumed operations as coal stocks rise, local media said on Monday, in the first signs that China's worst power crisis in 4 years is easing.

Power shortages in the coal-rich province, among the worst hit in this summer's power crisis, have eased to below 1.5 gigawatts (GW), said a local newspaper, an improvement from a maximum gap of 5 GW forecast earlier.

Inventories of thermal coal have risen to above 10 days of consumption, said the paper.

Northeast China's Liaoning province has lifted power rationing after coal inventories at its key thermal generators rose above critical levels, official Xinhua said in its website www.xinhuanet.com. The report did not say if rationing had been lifted in Shanxi.

China is facing its worst summer power crisis since 2004, caused mainly by a coal shortage that has forced nearly half the nation to ration power, hitting a number of key sectors, particularly energy-intensive metals.

Power shortages were one of the factors contributing to a fall in China's industrial output growth in the first seven months to its lowest levels in 19 months. [ID:nPEK108003].

Power firms have cut output in the face of costly and scarce coal and government caps on electricity prices, which have squeezed profits.

At least four of China's five major power generating groups, including the parents of China Power International (2380.HK) and Huadian Power (1071.HK), were reported to have lost a total 7 billion yuan ($1 billion) in the first half.

Easing power shortages in Shanxi would allow more than 700,000 tonnes of electricity-hungry aluminium smelting capacity to resume operations and boost profits at firms such as Aluminum Corp of China Ltd (2600.HK) (601600.SS), whose half a million tonnes of capacity has been affected by the shortages.

Chalco said last month its Huaze smelter had stopped 25 percent of 280,000 tonnes of annual capacity and its Hua Sheng smelter had halted 22 percent of 220,000 tonnes of capacity.

Shanxi also houses China's top stainless steel mill, Shanxi Taigang Stainless Steel Co (000825.SZ).

(To read more stories on China's power crisis, click on [ID:nCHINAPOWE]

(Reporting by Chen Aizhu and Beijing newsroom; additional reporting by Polly Yam in Hong Kong; Editing by Kim Coghill)