LONDON (Reuters) - The Chinese government is serious about forcing aluminium producers in 28 cities to cut output during winter, potentially cutting production by 1-1.5 million tonnes, an executive at China’s largest aluminium maker said on Thursday.
Aluminium prices CMAL3 rose to their highest in two years after China, the world’s top producer, said it would force smelters in four provinces surrounding Beijing to cut output by 30 percent over the winter heating season to battle pollution.
“This government is very determined in reforms and structural readjustment,” Lu Dongliang, a senior vice president at Chalco (2600.HK), told an industry conference in London.
“I‘m very confident that these (measures) will be implemented. Whether to 100 or 80 percent is still to be seen ... But personally I‘m very confident.”
The winter heating season runs for four months from November. Lu said that 12 million tonnes of capacity would be affected and production would fall by between 1 million tonnes and 1.5 million tonnes, or 3-4 percent of China’s annual total.
A separate crackdown on illegal aluminium capacity could affect between 3 million tonnes and 8 million tonnes of capacity, he added. It is not clear how this would affect production.
Lu said the crackdown is likely to accelerate a shift in production capacity from heavily populated areas to western China.
“We already have some enterprises thinking of a capacity swap ... to transfer capacity to western China, where costs are cheaper,” he said. “Whether this happens remains to be seen.”
Lu also said that Chinese aluminium consumption would grow by 7-10 percent in 2017 and 2018 and that China’s production capacity would climb to 45 million tonnes by 2020.
Reporting by Peter Hobson; Editing by David Goodman