China's controls on aluminium, due to energy capacity 23 GW short, slow Chalco expansion

China's Luoyang Xinan Electrical Power Group, looking to sell part of its 190ktpy Wanji Aluminium Co. subsidiary to Aluminum Corp. of China Ltd.(Chalco), is worried government reining in of the energy-intensive aluminium industry will hamper an agreement. The company expected to sign an agreement by the end of last year but the process slowed down. In the past year the Chinese government has imposed measures, including credit curbs, higher power fees and taxes, to cut output of aluminium as part of an effort to ease power shortages. China was hit by its worst power crunch in two decades last year. This year it could have a power shortfall as much as 23,000 megawatts, according to official predictions. Despite harsh market conditions, the Luoyang executive said the power group which provides all electricity Wanji needs would not sell the subsidiary at a lower price, the executive said. Industry sources said state-controlled Chalco was in talks with Shanxi Guanlu Co. Ltd. and Jiaozuo Wanfang Aluminium Co. to take a controlling stake in the respective smelters but was not pursuing it aggressively. Shanxi Guanlu has annual capacity of 330,000 tonnes of primary aluminium and Jiaozuo has 204,000 tonnes. Board secretary Liu Qiang said Chalco was in talks with a few smelters in China to buy aluminium assets but did not name them. Chairman Xiao Yaqing said in August Chalco's aluminium capacity would expand to over 2 million tonnes by the end of 2006 as the company planned to acquire some aluminium assets, including Wanji. Chalco, the country's main producer of alumina, is also the largest producer of aluminium and aims to boost output of the metal by 10 percent from last year to 850,000 tonnes in 2005. Chalco, eight-percent owned by U.S. giant Alcoa Inc. , has agreed to pay $92.7 million for a 28 percent stake in Lanzhou Aluminium Co. Ltd., which produced 155,000 tonnes of aluminium ingot and 43,100 tonnes of aluminium products last year.(Reuters - 04/22/05)