China tightens rules on alumina expansion to tackle overcapacity

China tightened rules on building new alumina plants, in a bid to tackle overcapacity that has caused a plunge in prices in the world’s top metals market.

Companies won’t be allowed to build new alumina plants in heavily polluted areas, according to an aluminum industry development plan for 2025-2027 issued by the Ministry of Industry and Information Technology on Friday. Alumina is made from bauxite, which is usually imported, and is the key feedstock for aluminum, the most widely used metal.

Firms building new alumina projects should also “in principle” control enough bauxite supply to feed the plants, a directive that mirrors similar guidance on raw materials given to China’s copper smelters.

For years, China has pledged to contain the blind expansion in alumina capacity. But a widening surplus of the mineral has led to a surge in exports in recent months.

Aluminum Corp. of China Ltd., the country’s largest state-owned aluminum producer, said earlier this week that the domestic alumina market would swing to a surplus this year, with around 10.3 million tons of new capacity planned amid limited demand growth.

The country also aims to boost domestic bauxite resources by 3%-5% through 2027, and boost recycled aluminum output to over 15 million tons, according to the plan.

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