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China aluminium shutdowns push prices sharply higher
Yesterday, Chalco, the Chinese state aluminium giant that is one of the world’s top producers of the metal, announced that it planned to close down temporarily 380,000 tonnes of production capacity – or a tenth of its total output.
In a filing, the company said it had decided “to exercise flexible production on part of its aluminium production line” as a result of “current market conditions”.
Aluminium prices have been hovering at three-year lows for much of the past 12 months as the market struggles with plentiful supplies and high inventories.
Aluminium traders and analysts said Chalco’s move appeared to be part of a more concerted push by the Chinese aluminium industry, which has the highest cost of production in the world, to close down unprofitable plants in the hope of propping up prices.
According to one trader, the China Non-Ferrous Metals Industry Association last week organised a meeting of major smelters in Beijing with the objective of reaching a collective agreement to curtail production, leading Chinese traders to expect higher prices.