China’s Biggest Aluminum Producer to Cut Outdated Capacity (Bloomberg News – June 20, 2017)

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China Hongqiao Group Ltd., the nation’s biggest aluminum smelter, is curtailing outdated capacity amid a broader crackdown by the government on illegal production. Shares of aluminum makers gained in China.

The company, the main aluminum arm of Shandong Weiqiao Pioneering Group Co., declined to give the scale or timing of the reduction in an emailed statement. Two people with knowledge of the situation said Weiqiao’s aluminum business started cutting 250,000 metric tons of annual capacity from Tuesday, declining to be identified as the information is private. A Weiqiao spokesman couldn’t be reached for comment.

China, the world’s top producer of the lightweight metal, has stepped up efforts this year to prune capacity to reduce excess supply. Its top economic planning agency issued an order in April for local governments to halt smelters that violate environmental guidelines, while a plan earlier in the year called for capacity to be shuttered during the peak pollution season over the winter. China’s total smelting capacity last year was about 40 million tons.

Hongqiao’s move shows its commitment to the government’s directive and gives the market confidence that China’s capacity curbs are actually happening, Liu Xiaolei, an analyst with SMM Information & Technology Co., said by phone from Shanghai.

SMM reported Monday that Xinjiang province, China’s second largest production hub after Shandong, is beginning environmental checks on smelters this week.

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