Aluminum smelters in China face winter power shortage

According to Macquarie Group Ltd, aluminum smelters in China may face a “critical shortage” of power that prevents them from ramping up output in the first quarter of 2011, helping to buoy prices as stockpiles decline further.

Analysts including Bonnie Liu in a report wrote that “Our recent visit to Shanxi and Henan provinces suggested the power supply would still be in critical shortage over the winter due to tight supply of coal.”

They wrote that aluminum prices may gain over the next three or four months, without giving a forecast.

According to the report, China curbed power to energy-intensive industries in the final quarter in a bid to meet a yearend carbon-emission target, hurting output of some metals including aluminum. More than 2 million tonnes of aluminum capacity was halted in Guangxi, Guizhou, Henan and Hunan in the drive.

The analysts based in Shanghai said that “Although power restriction should ease significantly from early 2011, we believe it will be difficult to be able to fully restore power to all aluminum smelters.”

The report said that the power curbs led to a drawdown in aluminum inventories at so-called reported warehouses in China from 1.3 million tons in May to less than 600,000 tonnes, about two weeks of demand. The coal shortage may now help to reduce them further to very low levels in the second quarter.

Mr Jeffrey Landsberg president of New York City-based Commodore Research & Consultancy wrote that “Coal shortages have become very severe in the central part of the nation as Shaanxi, Hubei, and Henan provinces have recently experienced severe snow storms.”

(Sourced from www.worldal.com)