BEIJING (Reuters) - Aluminum Corp of China, known as Chalco, will consider carrying out maintenance or even shuttering some aluminium production facilities as well as cutting alumina output because of current low prices, a company executive said on Friday.
Chalco, China’s biggest state-run aluminium producer with 3.79 million tonnes of output last year, is also the world’s biggest supplier of alumina, having produced 13.8 million tonnes of the aluminium raw material in 2019.
Aluminium prices in Shanghai hit a more than four-year low of 11,250 yuan ($1,586.90) a tonne in Shanghai on Thursday as ample supply swamped weak demand in the wake of the coronavirus outbreak.
If the aluminium price falls below the company’s cash costs, Chalco will consider putting some production facilities under maintenance or shuttering them altogether, Chief Financial Officer Wang Jun said in an online investor Q&A, without putting a figure on Chalco’s production costs.
Analysts say most Chinese smelters are losing money at current aluminium prices, leading to output cuts.
“There is no change in the company’s alumina production capacity at the moment, but (with) alumina it is relatively easy to implement flexible production,” Wang said, using an euphemism for making production cuts, noting that the cost of switching aluminium smelters off and on in this way was too high.
“The company will make adjustments at an appropriate time according to the alumina price changes,” he added.
Alumina prices in China initially rose in the aftermath of the coronavirus outbreak as bauxite mine closures and logistical problems left refineries short of feedstock.
However, with transport restrictions largely lifted as China contains the outbreak, alumina has been tracking aluminium lower and average spot alumina prices in China, as assessed by SMM hit their lowest since September 2016 at 2,246 yuan a tonne on Friday.
While that will lift the cost pressure on smelters that purchase alumina, Chalco’s alumina sales accounted for 21.2% of its revenue last year, a company presentation last week showed.
Reporting by Tom Daly; Editing by David Goodman and Raju Gopalakrishnan
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