China 2009 Aluminium Prices seen Below Costs on Oversupply: CNMA

21Jan2009 Chinese domestic aluminium prices will fluctuate below production costs on oversupply, the China Mining Association reported Wednesday, quoting Wen Xianjun, vice chairman of China Nonferrous Metals Association.

CNMA is striving to have power supplied directly by power plants, rather than power grids, in several pilot aluminium enterprises and then spread it throughout the whole industry, Wen said.

Wen noted that Chinese domestic aluminium prices generally depended on the relationship between demand and supply as well as their production costs.

Power normally accounts for 40% of the total costs for producing electrolytic aluminium in China, 15 percentage points higher than the global average, according to Wen, who emphasized the necessity of direct power supply for aluminium enterprises.

The nearby aluminium futures February contract was settled at Yuan 11,655($1,704)/mt on the Shanghai Futures Exchange Wednesday, while the farthest-forward December contract was settled at Yuan 11,775/mt.

CHINA'S ALUMINIUM CAPACITY UP 16.8% TO 18 MILLION MT IN 2008

Meanwhile, Wen estimated China's capacity of electrolytic aluminium may have jumped 16.8% year on year to 18 million mt by the end of 2008, with total annual output estimated at around 13.25 million mt.

China's electrolytic aluminium output has seen a decrease month by month since September 2008. To date, the whole industry has cut production of 3.5 million mt.

Wen also estimated China's capacity of alumina at 34 million mt in 2008,up 21.43% year on year, with total output if around 22.72 million mt. So far, China has cut about 9.6 million mt of alumina production, he added.