Aluminium Corp of China, known as Chalco, is to cut alumina output on some of its production lines in the northern Chinese province of Shanxi because of high bauxite prices and low alumina prices.
In a statement to the Hong Kong stock exchange, the state-run Chinese aluminium producer said that about 770,000 tonnes of annual alumina production capacity at its Shanxi New Material unit would be affected by "flexible" output arrangements, a euphemism for production cuts, with effect from Thursday.
"As affected by the market environment and other factors, the cost of bauxite in Shanxi continues to rise, while the market price of alumina keeps low," Chalco said, adding that the move was aimed at "maximising benefits".
Bauxite is a rock processed to produce alumina, which is then used to make aluminium.
Chalco is one of China's biggest alumina refiners, with annual capacity of 16.86 million tonnes at the end of 2017, according to its annual report.
Shanxi New Material had capacity of approximately 2.6 million tonnes, but produced only 1.85 million tonnes of alumina last year, the report says.
Roughly two tonnes of alumina are required to make one tonne of aluminium metal, of which China is by far the world's biggest producer.
Bauxite prices in Shanxi were assessed at 495 yuan ($74.59) a tonne on July 2 by data provider SMM, the highest in records going back to May 2013.
A crackdown on illegal mining in Shanxi, China's second-biggest alumina province by production, led to tight supply in the region, research house Antaike said in March.
Spot alumina prices in northern China, meanwhile, slipped to 2,700 yuan a tonne on July 2, the lowest since August 2017, and are currently at 2,715 yuan a tonne.
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