* Chalco says Shandong unit subject to ‘flexible production’
* Says is considering transformation, upgrade of plant
* Company has closed 850kt of capacity since 2018 - consultancy
By Tom Daly
BEIJING, Jan 31 (Reuters) - Aluminum Corp of China , known as Chalco, said late on Wednesday it had stopped production at an aluminium smelting plant in eastern China’s Shandong province, citing high electricity costs.
In a statement to the Shanghai and Hong Kong stock exchanges, Chalco said it was implementing “flexible production” on all 200,000 tonnes per year of capacity at its Shandong Huayu facility due to “high electricity prices, regional environmental protection policies, market environment and other factors.”
The closure, which equates to around 5 percent of Chalco’s total controlled operating capacity, underscores the financial pressure aluminium smelters in China, the world’s top producer of the metal, are facing with Chinese aluminium prices languishing near two-year lows and amid lacklustre domestic demand.
Shandong, China’s top aluminium smelting province, last year introduced new fees for onsite coal-fired power plants, which are used by companies like Huayu to generate electricity for the power-intensive smelting process, causing an increase in costs.
This is not the first time Chalco has announced production cuts this winter.
On Nov. 30, the company said it was shutting 470,000 tonnes of production lines, including some at Huayu.
Chinese consultancy Baiinfo estimates that 100,000 tonnes of that closed capacity came from Huayu.
Despite the closures, China’s aluminium production rose to a record monthly high of over 3 million tonnes in December.
Since 2018, Chalco has closed around 850,000 tonnes of primary aluminium production capacity and will close another 190,000 tonnes in the first quarter of 2019, according to Baiinfo manager Zhang Rufeng. Chalco did not immediately respond to a request for comment on the consultancy’s figures.
Chalco is discussing “transformation, upgrading and development,” with other shareholders of Shandong Huayu, it said in a statement.
Chalco owns a 55 percent stake in Huayu, according to its most recent annual report, which did not identify the other shareholders. (Reporting by Tom Daly; editing by Christian Schmollinger)