Power Cuts for Aluminum Firms

Aluminum processors in China have received notices from energy suppliers asking them to brace for power cuts as the country faces electricity shortages this summer, potentially heralding disruption across the industry.

Fabricators in areas short of power, including Henan Province, the country's largest aluminum-producing region, "were told to be prepared for restrictions," Wan Ling, a Beijing-based senior consultant at researcher CRU International Ltd, said yesterday. She declined to name processors that may be hit.

Shutdowns of fabricators, which process the ingots made by smelters into products, may cut demand for the refined metal. Smelters in the world's largest aluminum producer may be next in line to get notices that their power supplies may be interrupted, according to Beijing Capital Futures Co.

"It looks like the power situation will get worse, so it's highly possible that aluminum smelters will be next," said Xiao Jing, an analyst at Beijing Capital. Electricity accounts for as much as half of the cost of smelting aluminum, the lightweight metal that's used in autos, packaging and construction.

An electricity shortfall this summer may be as much as 40 gigawatts, surpassing the 2004 record, according to State Grid Corp of China. Power prices for industrial and commercial users in 15 provinces will be raised from today, according to the National Development and Reform Commission.

The increase will bring more cost pressures for energy-intensive industries, Dave Dai, regional head of utilities at Daiwa Securities Capital Markets, said in a note.