Aluminium prices rose to a record on the London market following news that China will produce 6.5 per cent less aluminium in 2008 than previously forecast because of power shortages.
China, the world’s top aluminium producer, had been forecast to produce 15.5 million tonnes of primary aluminium this year but this had been cut to 14.5 million tonnes, Wen Xianjun, vice president of the state-controlled China Nonferrous Metals Industry Association, said.
“I have adjusted down the estimate by 1 million tonnes. If power supply tightness escalates, the output could be even lower,” Wen told Reuters.
The output forecast is still 18 per cent more than in 2007, but this would represent a sharp slowdown from the 34 per cent capacity increase that year
China’s top 20 aluminium producers said they would cut output by up to 10 per cent as the country heads towards its worst power supply crisis in years, sending prices of the metal to a record high of $3,380 a tonne on July 11 for delivery in three months, up $90.15 or 2.7 per cent.
Wen said the cuts would be longer lasting than in late 2005, when 23 smelters reversed joint output cuts within a month as prices rose.
This year, power supplies have limited production, while smelters are also worried that the aluminium market will be oversupplied in the second half on new capacity and weaker consumption, he said.