China's annual production capacity of primary aluminium may rise by 60 percent in the next four years as smelters build new facilities in resource-rich provinces, a director at a state-backed industry association said on Wednesday. Hu Changping of the China Non-ferrous Metals Industry Association said capacity would jump above 40 million tonnes by 2015 from 25 million tonnes forecast for the end of 2011.
China, the world's top producer and consumer of aluminium, may see annual demand grow by an average 8.7 percent between 2011 and 2015, down from 17.3 percent in the past five years, Hu told an industry conference in Zhuhai city, Guangdong province. The transport and building sectors would remain the major driving forces for aluminium consumption growth in the coming four years, he added.
China has completed the building of 2.75 million tonnes of new aluminium smelting capacity so far this year of which about one million tonnes has started commercial production, Hu said. In 2012, about 4 million tonnes of new capacity is due to kick off production and the bulk will come from the resource-rich western provinces, especially Xinjiang, boosting the annual capacity to 30 million tonnes, Hu told the conference.
About 10 million tonnes of planned new capacity would be built in the north-western region of Xinjiang by 2015 to take advantage of cheap solar and wind energy supplies, Hu told Reuters on the sidelines of the conference. Electricity accounts for about 40 percent of production costs and the government will raise power prices for non-residential users by 0.03 yuan per kilowatt hour starting on Thursday, the official Xinhua News Agency reported on Wednesday.
"The year after next year, the difference will be obvious," Hu told Reuters, referring to the electricity costs in Xinjiang compared to other provinces. Some existing, high-cost smelting capacity may be forced to close from 2013, including some in Henan province, China's top aluminium producing region, because of rising electricity costs, Hu said. But he said the scale of these closures would depend on aluminium prices and demand.
Domestic prices have fallen below 16,000 yuan ($2,500)a tonne, but competitive smelters were still making profits, Hu said. He said that these prices were below some smelters' production costs but they did not want to cut production alone to support prices. Spot aluminium traded at about 15,960 yuan a tonne on Wednesday in China, down 14 percent from the year's highs of above 18,600 yuan in late July-early August.