China's Xinfa shuts aluminium capacity in Xinjiang after blast - sources

BEIJING, Aug 20 (Reuters) - Xinfa Group, one of China’s top aluminium producers, has shut down an aluminium production line after an explosion at a plant in the northwestern Chinese region of Xinjiang, according to a company source.

The accident caused the company to shut down annual smelting capacity of around 500,000 tonnes at the plant north of the Xinjiang capital of Urumqi, the source said, declining to be identified as he was not authorised to speak to the media.

The closure, which has exacerbated supply concerns in top aluminium producer China after flooding hit the smelting heartland of Shandong earlier this month, sent Shanghai aluminium prices to their highest in almost 10 months on Tuesday, at 14,455 yuan ($2,046.58) a tonne..

“The temperature in the pot room got too high and there was a small explosion, so we shut it down for safety reasons,” the source said.

Xinfa is working to restart the production as soon as possible, the source said. The company has about 1.9 million tonnes of smelting capacity in Xinjiang.

It was not immediately clear on which day the incident happened. Xinfa did not respond to an email seeking comment.

An industry analyst who spoke to the company about the incident said there was initially an unspecified leakage at the plant “a few days ago,” causing 100,000 tonnes of production to be suspended, before the subsequent explosion took the 500,000 tonnes offline.

A second industry analyst was told that the incident took place on Monday. The price impact could continue if the plant cannot resume production soon, as the market is fearing an outage of up to five months, the second analyst added.

Both analysts declined to be identified due to the sensitivity of the matter.

Consultancy AZ China said in note to clients on Monday that 500,000 tonnes of capacity in Xinjiang had been shut down, without naming the company affected.

“Bottom line, a cold potline means an outage of at least 2-3 months,” AZ China Managing Director Paul Adkins said.

The closure is also “bad news for alumina,” Adkins told Reuters. “Just when the price seemed to stabilise at or around the cost of production, this comes along. A loss of 1 million tonnes of (annual) alumina demand.”

Prices for alumina, the substance used to make aluminium, were assessed at 2,470 yuan a tonne in northern China SMM-ALM-NCHN on Tuesday, after hitting a two-year low of 2,430 yuan a tonne on Aug. 5. ($1 = 7.0630 Chinese yuan renminbi) (Reporting by Tom Daly in Beijing and Mai Nguyen in SINGAPORE; additional reporting by Min Zhang, Shivani Singh and Beijing Newsroom; editing by Christian Schmollinger)