Aluminium smelters braced for shutdowns

The mainland's overcapacity-afflicted aluminium smelting industry could soon see a widespread shutdown of uncompetitive plants partly because of more cost-competitive imports, according to the chief of the country's third-largest smelter.

"The second phase of industry rationalisation is already beginning," said Zhang Bo, the chief executive of China Hongqiao.

"The first phase involved capacities that were very outdated, while the second will hit those that are still surviving but will face stiffer rivalry from imports."

Zhang made the comments at a press conference three days after the firm posted a 1.1 per cent year-on-year drop in net profit to 2.81 billion yuan (HK$3.53 billion) for the first six months of the year.

Its performance, supported by self-owned power plants, is among the best in the industry where losses are common due to rising energy and raw material costs. Electricity typically accounts for close to 40 per cent of smelters' operating costs.

Zhang said the industry's competitive threats came from a planned major aluminium smelter project in Malaysia supported by cheap hydropower and greater push from Rusal, the world's largest smelter of the lightweight industrial metal, to sell to China.