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Chinese aluminium producer Henan Zhongfu Industrial has closed a 250,000-tonne-per-year smelting subsidiary and plans to transfer the capacity to southwest China’s Sichuan province, a company official said on Thursday.
Aluminium smelters in China, the world’s biggest producer of the metal, are struggling to make money at current Shanghai aluminium prices, which are languishing near two-year lows, resulting in significant output cutbacks.
In a statement to the Shanghai Stock Exchange late on Wednesday, Henan Zhongfu Industrial said production at its subsidiary Linfeng Aluminium, which accounts for 30 percent of the company’s aluminium smelting capacity, had been suspended.
Despite recent attempts to improve energy efficiency, coal prices continue to rise and production restrictions during the heating season leave Linfeng Aluminium, based in the city of Linzhou in Henan, “facing relatively large pressure on production operations,” the statement added.
Aluminium producers use coal to generate power for the energy-intensive smelting process.
The company plans to move the capacity to a “cost-competitive region”
Following the suspension, the company plans to move the capacity to a “cost-competitive region,” according to the statement, which did not provide the exact location.
The Henan Zhongfu official said the capacity would be transferred to the city of Guangyuan in Sichuan province but was unable to provide a timeframe for the move.
China’s Ministry of Industry and Information Technology allows smelters to move or acquire new capacity in regions that have available quotas.
Henan, in central China, is one of the provinces that place restrictions on industry during the winter months, when pollution spikes due to demand for heating.
Sichuan, on the other hand, does not impose such measures and has hydropower facilities that provide an alternative energy source to coal.
Henan Zhongfu estimated it would book an impairment charge of 600 million yuan-700 million yuan ($87.2 million-$101.7 million) due to the closure.
($1 = 6.8809 Chinese yuan renminbi)
(Reporting by Tom Daly; Editing by Jason Neely)
