August 2, 2017 / 9:01 AM / a year ago

UPDATE 1-China Hongqiao says to cut 2 mln T/year of outdated aluminium capacity

(Adds comments and details from company spokeswoman in paragraphs 2, 3 and 4, background on sector crackdown)

BEIJING/MELBOURNE, Aug 2 (Reuters) - China Hongqiao Group Ltd, the world’s largest maker of aluminium, said on Wednesday it plans to shut more than 2 million tonnes a year of outdated smelter capacity, but still expects production to remain at levels close to current output.

“We can confirm that the company will be cutting more than 2 million tons of outdated capacity,” a Hongqiao spokeswoman in Hong Kong said.

“This will be replaced by new capacity, keeping the total capacity at 6.5 to 7 million tons. The company expects that annual production volumes will exceed 7 million tons as the utilisation rate goes over 100 percent,” she said.

The Hongqiao spokeswoman did not specify when the capacity cuts or additions would take place. She also did not say when the company expects production to exceed 7 million tonnes.

China has cracked down this year on its bloated aluminium sector by closing plants that did not obtain proper permits to build or expand, or that have not met strict environmental standards set down as part of a push to clear its skies.

Analysts said the pace of closures quickened from July, and estimate some 3 million to 4 million tonnes of capacity will close this year, around a tenth of the country’s total, tightening the global supplies and pushing up prices.

Shanghai Futures Exchange aluminium rose as much as 2 percent on Wednesday to hit its highest in more than three months.

Trading in Hongqiao Group’s Hong Kong shares were halted in March after research firm Emerson Analytics published a report alleging the company underreported its costs. (Reporting by Melanie Burton in MELBOURNE and Tom Daly in BEIJING; Editing by Christian Schmollinger and Tom Hogue)

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