aluminium growth faces energy hitch

  1. 6,931 Posts.
    Now this is an interesting story. A while ago I read how the Chinese were planning to boost Al production by hundreds of thousands of tonnes and I became concerned about the future of Al stocks in Australia. This story, however, puts a different light on it. I am now bullish about Al stocks in Oz. The lack of cheap electricity in China will stop them. Also note how the Chinese have announced deals but they have all fallen through so far.
    The story is from the South China Morning Post.



    Saturday, September 6, 2003

    Aluminium growth faces energy hitch


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    China's ambition to expand its aluminium output is likely to be curbed by power shortages as its booming economy consumes more electricity and pushes up coal prices, an industry consultant said.
    "What will be a big issue is the electricity," said Michael Komesaroff, the chief executive of Urandaline Investments, a consultant based in Australia that specialises in capital intensive industries.

    Mr Komesaroff said the power shortage had already deferred start-up of some new aluminium plants and accelerated closures of polluting Soderberg plants - something the central government had long wanted but failed to achieve due to local interests in retaining jobs. Soderberg, an older production technology, is being phased out globally in favour of more environmentally friendly pre-baked technology for making the energy-intensive light metal.

    "You have started to see power tariffs creeping up. You started to see smelter expansions slowing down. All of these are coming because of the availability of electricity," he said on Thursday.

    Mr Komesaroff estimated as much as 400,000 tonnes to 450,000 tonnes would be taken off annual capacity this year as Soderberg technology was retired.

    Things would get tougher for aluminium producers as China was building up a national transmission grid to allow power generators to sell surplus electricity at higher prices to affluent consumers in distant regions, he said.

    The Australian consultant also cast doubt on whether more power or coal companies were willing to join hands with aluminium producers, such as Aluminum Corp of China (Chalco), to build new smelters.

    "Why should I need to spend more capital to build a smelter so that I've got an assured market for my power when the assured market cannot pay as much as domestic consumers at the end of the national grid?" Mr Komesaroff asked.

    Referring to Chalco's plan to build a 280,000-tonnes-per-year smelter with Zhangze Electrical Power, he said: "This was the third. Why did the other two not work out?"

    Chalco, already China's biggest smelter with plans to boost its aluminium capacity to 1.5 million tonnes by 2005 from about 780,000 this year, said it was in talks with power generators on aluminium ventures.

    Mr Komesaroff was sceptical of China's latest drive to boost domestic output of alumina, the raw material for aluminium, because of a shortage created by the country's rampant expansion in aluminium production.

    With alumina prices high - at about US$300 per tonne - analysts counted as many as 12 alumina projects in China, which is expected to remain in a deficit of millions of tonnes for the next few years.

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