A group of six Chinese aluminum smelters met Monday in Beijing to discuss a fresh round of production cuts should domestic prices fall below Yuan 11,500/mt (around $1,400/mt on an import parity basis), industry sources said Wednesday.
Senior officials from Chalco, Hongqiao, Yunnan, Jinjiang, Jiugang and China Power Investment Corp discussed smelting curtailments, and delaying bringing new facilities online, should aluminum prices struggle to stay above Yuan 11,500/mt, sources said.
The threshold price is about Yuan 700/mt or $106/mt below the current domestic aluminum market.
The front-month contract on the Shanghai Futures Exchange closed Wednesday at Yuan 12,185/mt.
Chinese domestic prices have plunged about Yuan 700/mt in the past two months.
On Wednesday, two Chinese smelter sources said domestic aluminum prices may be less likely to deteriorate to Yuan 11,500/mt, although one said he would not rule out a floor of Yuan 11,800-12,000/mt.
Domestic demand has been relatively decent, and for the last few months local inventories have been lower than usual, especially for ingots, they said.
Steady LME aluminum prices have also given Chinese aluminum prices some form of support, one added.
The news of China's smelting curtailment discussions did not appear to have an immediate bearish impact on the price of alumina, although the feedstock is expected to weaken should the cuts materialize.
Between last October and February, when China idled 4 million-5 million mt/year of loss-making smelting capacity, the price of Australian alumina fell $58.50/mt.
Since late February, China has ramped up 500,000-1 million mt/year of aluminum smelting capacity, according to Platts estimates, in response to stronger margins.
S&P Global Platts assessed the price of Australian alumina at $246/mt FOB on Tuesday.
The assessment was unchanged from a day earlier but down $3/mt in the last week on the back of unplaced cargoes in Australia, China, India and the Americas.
