UPDATE 1-China's Chalco shuts down 10% of its alumina capacity

* State-run company cuts 1.8 mln tonnes of alumina capacity

* Move follows report of an accident at Shanxi plant (Adds background)

BEIJING, July 2 (Reuters) - Aluminum Corp of China Ltd , known as Chalco, said on Thursday it would implement “flexible production”, a phrase used to refer to output cuts, at three alumina production lines accounting for about 10% of its total capacity.

Chalco is the world’s biggest supplier of alumina, the substance used to make aluminum, with an annual capacity of 18.86 million tonnes, according to its annual report, which adds that it produced 13.8 million tonnes in 2019.

The three lines, at subsidiaries Shanxi Huaxing and Shanxi New Material in northern China’s Shanxi province, have a combined capacity of 1.8 million tonnes per year, state-run Chalco said in a Shanghai Stock Exchange filing.

The move is being made based on market conditions, Chalco said, without stating how long the closures would last.

Average alumina prices in China SMM-ALM-AVEG have risen more than 10% from a four-year low in April to 2,287 yuan ($324) a tonne but are down about 6% so far this year, data from industry information provider SMM shows.

Chalco, which also produces aluminium, said in April it would consider cutting alumina output if prices remained low - the same month China’s alumina output hit a nine-month high of more than 6 million tonnes as COVID-19 restrictions eased.

SMM reported this week that an alumina plant in Shanxi - identified by one local source familiar with the matter as Shanxi Huaxing - had cut 1 million tonnes of annual production following an equipment accident.

Asked about a possible accident, a spokesman for Chalco said the cuts in production were a normal adjustment based on the market environment. ($1 = 7.0613 Chinese yuan renminbi) (Reporting by Tom Daly and Min Zhang; Editing by David Clarke)