China halts 2.37 million tonnes aluminium capacity expansion

China's measures to curb over-investment in key industrial sectors have stopped or delayed construction of 2.37 million tonnes of planned aluminium capacity since mid 2003, but a further three million tonnes has gone ahead, an industry official said on Friday.
Kang Yi, director of the China Nonferrous Metals Association, said projects to build a total of 1.47 million tonnes of aluminium capacity had been stopped and a further 900,000 tonnes of new expansion had been delayed.
But he said 1.16 million tonnes of new capacity had already been built but not yet put into production, while a further 1.82 million tonnes was under construction.
"Investment in aluminium is basically under control now," Kang said during a derivatives market forum hosted by the Shanghai Futures Exchange.
He said the Chinese government had not received any fresh proposals for new aluminium projects since August.
Beijing imposed its latest restrictions on bank lending in late April, the third and most effective of such moves since mid 2003, in an effort to rein in its red-hot economy, which grew 9.8 percent between the first quarters of 2003 and 2004.
Aluminium is one of the key sectors, along with steel, cement and property, being targeted by China's government as it seeks to curb rampant over-investment.
China's total aluminium smelting capacity grew 2.8 million tonnes, or 50 percent, to a total of 8.34 million tonnes last year, Kang said. He gave no estimate for end-2004 capacity.
The industry has seen an explosion of capacity over the past few years as investors rush to meet sizzling demand from the booming construction, automotive and packaging sectors.
But by April this year, 17 Chinese smelters had fully or partially stopped production, taking around 400,000 tonnes of existing capacity out of operation, Kang said.
China has suffered a series of power shortages since the end of last year, and supply of aluminium smelters' key raw material, alumina, has also been tight.
Power-hungry aluminium smelters also took the brunt of an increase in power charges - the second this year - and the withdrawal of power subsidies to new smelters on May 1.
The government also cut a value-added tax rebate on aluminium exports to eight percent from 15 percent from January 1, and is considering scrapping or reducing the rebate further.
China's aluminium consumption was forecast to rise 17.1 percent to 6.08 million tonnes this year, investment bank Merrill Lynch said in a report released in March.