Shifting China's aluminum production to West won't solve the industry's high costs and pollution issues: Alcoa CEO

China's move to shift aluminum production to energy-rich western areas of the country won't solve the industry's problems with high costs and pollution, Alcoa Inc. (AA) Chief Executive Officer Klaus Kleinfeld told the state-run China Daily newspaper in an interview published Tuesday.

The Chinese government has tried to cull excess capacity in an industry it views as environmentally problematic and far down the value chain.

Describing China's aluminum output as "expensive and not particularly clean," Mr. Kleinfeld said 80%-87% of the country's output is in the top half of the global cost curve and more than 90% of power supplying its refineries and smelters comes from coal.

"As a result, one-third of China's production capacity is unprofitable," he said.

The shift to the coal-rich west "has not addressed any of the fundamental problems, and will have a minor effect on its global cost curve position," Mr. Kleinfeld told the newspaper.

China's aluminum industry remains challenged by excess capacity, low prices and constrained access to bauxite imports from Indonesia, he said.

Still, the country's aluminum market is set to grow by 11% in 2012, because urbanization and a growing middle class drives demand from aerospace, automobiles, home appliances, transportation and other aluminum-dependent industries, he said.

The Pittsburgh-based bellwether aluminum producer has a joint venture with China Power Investment Corp. to supply domestic markets, but is also planning to develop the partnership outside China, Mr. Kleinfeld said, without elaborating.