Singapore 15/03/2016 - China Hongqiao Group has plans to lift aluminium smelting capacity to six million tonnes per year by end-2016 - up 16 pct from its smelting capacity at end-2015 - provided the aluminium market “recovers to a certain level,” a company spokeswoman told FastMarkets on Tuesday.
“If the price of 11,000-12,000 yuan per tonne is sustainable for a long period of time, we believe the market should be good,” said the official.
The price of the most active aluminium contract on the Shanghai Futures Exchange has stayed above 11,000 yuan since February 22, having recovered from an all-time low of 9,555 yuan in late-November to hit a near-five-month high of 11,635 yuan on March 4.
The SHFE May aluminium contract was last at 11,315 yuan on Tuesday, down 20 yuan from the previous day’s close.
After a spate of shutdowns among Chinese aluminium smelters in the second half of last year, industry participants are watching out for restarts of idled capacity after domestic aluminium prices hit 11,500 yuan per tonne - a price level most deemed "reasonable" for smelters to resume operations.
Analysts estimate that Chinese domestic aluminium smelting capacity that has already been or is planned to be restarted alongside new start-ups over the past two months amount to around 500,000 tonnes per year.
Smelters are proceeding cautiously on resuming output as there is uncertainty over whether the aluminium price rebound is sustainable, said market sources.
Capacity expansions at Hongqiao this year are being planned at subsidiary Shandong Weiqiao Aluminium & Electricity via the construction of new smelters, according to the official.
But the official added that should the market deteriorate, Hongqiao is not ruling out production suspensions.
Hongqiao had said in December that it will cut 250,000 tonnes per year of primary aluminium production with immediate effect due to weak prices.
The official could not immediately confirm status of the cut but noted that the company is still in the midst of ramping up capacity from its new expansions last year.
Hongqiao had lifted its production capacity by 28.8 percent to 5.186 million tonnes per year at end-2015. The expansions increased its aluminium output by 40 percent to 4.421 million tonnes in 2015.