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CORRECTED-Shanghai aluminium near 6-yr high on report Chinalco cutting output
September 20, 2017 / 7:45 AM / in a month

CORRECTED-Shanghai aluminium near 6-yr high on report Chinalco cutting output

(Correcting to show in 4th paragraph Jiaozuo Wanfang Aluminum is not a Chinalco unit)

BEIJING, Sept 20 (Reuters) - Shanghai aluminium prices on Wednesday hit their highest in nearly six years on a report that Aluminum Corp of China, known as Chinalco, has started cutting production in Henan province almost two months before official winter restrictions kick in.

The most-traded aluminium contract on the Shanghai Futures Exchange had jumped 3.9 percent, its biggest one-day leap since Aug. 9, to 17,140 yuan ($2,608.47) per tonne by 0635 GMT, its highest since October 2011.

Prices are up by some 28 percent so far this year on concerns that closure of illegal capacity and a crackdown on pollution will leave the market short of supply.

On Wednesday, industry website SMM said the city of Jiaozuo’s environmental protection office issued a notice that mentioned steps to curb output by a Chinalco unit, Zhongzhou Aluminum, and another company Jiaozuo Wanfang Aluminum.

Chinalco, China’s largest state-run aluminium producer, had on Tuesday started to reduce production at the units by more than 30 percent ahead of time, according to report.

The lower production, which is based on an electrolytic pot count, will last until March 15 2018, it added.

Jiaozuo is one of at least 28 cities in northern China that will be subject to restrictions on industrial output this winter, although the official curtailment period runs from Nov. 15-Mar. 15.

Chinalco did not immediately respond to a request for comment, while the Jiaozuo environmental protection office, part of the Ministry of Environmental Protection, could not be reached for comment.

A document published on the Henan provincial government’s website on Sept. 1 said Jiaozuo was taking early action to ensure it met the winter restrictions, the report said.

Aluminium and alumina companies would have to cut output by at least 30 percent, it said, in line with a “battle plan” document published by the Ministry of Environmental Protection last month.

SMM earlier reported that Henan would impose province-wide production cuts this winter, rather than limit them to major cities.

Jiaozuo Wanfang has aluminium smelting capacity of 420,000 tonnes per year, while Zhongzhou Aluminum has alumina production capacity of 2.81 million tonnes, according to their websites.

Helen Lau, an analyst at Argonaut Securities, said the market should not overreact to the early cuts.

“Probably I think they are just starting to prepare for the winter production cuts,” she said.

“So in order to get it all shut for the winter ... they have to start earlier. In order to get that (magnitude of) impact on production cuts you have to start now.”

$1 = 6.5709 Chinese yuan Reporting by Tom Daly; Additional reporting by Melanie Burton; Editing by Joseph Radford

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