November 16, 2017 / 9:56 AM / in 25 days

China Hongqiao mulls moving aluminium smelting capacity to Indonesia

* Hongqiao earlier shut 2.68 mln T smelting capacity in Shandong

* Company already runs alumina refinery in Indonesia

By Tom Daly

FUZHOU, China Nov 16 (Reuters) - China Hongqiao Group , the world’s biggest aluminium producer, is looking into the possibility of moving recently shuttered illegal smelting capacity overseas, mainly to Indonesia, a source close to the company said on Thursday.

Hongqiao had to shut 2.68 million tonnes in annual smelting capacity in its home province Shandong at the end of July amid reforms to cut excess supply in China. Hongqiao Chief Executive Zhang Bo told Reuters on Wednesday that this would not come back online next year.

However, the company is “reviewing the feasibility” of moving this shuttered capacity to other countries, said the source who was briefed on the plan.

Indonesia is the most likely destination since the company already has a 1-million-tonne per year alumina refinery in the Southeast Asian nation, the source said, adding that Hongqiao is also evaluating the Indonesian market to get an idea of local aluminium demand.

China is both the world’s biggest producer and consumer of aluminium, but Hongqiao could find its expansion options at home limited amid ongoing supply-side reforms and seasonal curbs on production for environmental reasons.

Hongqiao, with annual smelting capacity of 6.5 million tonnes, is among Chinese firms that must reduce aluminium output over winter, or from Nov. 15 until March next year, as part of China’s anti-smog campaign.

An executive at Hongqiao’s state-run rival, Chalco , earlier told the China Aluminum Week conference in Fuzhou his company was also looking to Indonesia as a source of bauxite, the aluminium ore which is processed into alumina which is then used to produce aluminium.

“It’s a good time to go global,” Chen Xuesen, deputy director of the strategy development department at Chalco parent Chinalco, or Aluminum Corp of China, told the same conference.

There has been a dearth of investment by Chinese companies in overseas aluminium smelting capacity, he said, except for Citic Resources Holdings’ interest in a smelter in Australia, and that it had been difficult to find places that can provide the necessary amount of power for the smelting process.

“More companies will take the initiative,” Chen said. (Reporting by Tom Daly; Editing by Manolo Serapio Jr.)

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