April 13, 2012 / 10:39 AM / 8 years ago

UPDATE 2-China March copper, aluminium output near record

* March copper output up 16.7 pct on month, 8.5 pct on year

* Aluminium output up 2 pct on month, 9.4 percent on year (Adds forecast, more comments, other base metals)

By Polly Yam

HONG KONG, April 13 (Reuters) - China’s production of refined copper and primary aluminium rose in March to the second-highest recorded level, and analysts expect output to remain strong into April as large producers bank on buoyant demand in March to May despite the threat of oversupply.

March copper and aluminium production exceeded some analysts’ expectations as smelters ramped up output. Newly installed capacity also lifted operating rates even though domestic demand has been lukewarm since January amid slower economic growth.

The domestic economy grew at the weakest pace in nearly three years in the first quarter, with the annual rate of expansion a lower-than-expected to 8.1 percent compared with 8.9 percent in the previous three months.

“Expectations of stronger demand during the peak consumption period have led to higher copper and aluminium production,” said Fu Bin, analyst at Jinrui Futures, a subsidiary of state-owned Jiangxi Copper Corp, parent of top producer Jiangxi Copper Co Ltd .

Refined copper production in March was up 16.7 percent from a month earlier at 510,000 tonnes, and rose 8.5 percent from a year earlier to the highest level since a record 518,000 tonnes in August 2011, according to data from the National Bureau of Statistics on Friday.

In the first quarter, refined copper production rose 9.8 percent from a year earlier to 1.385 million tonnes, adding pressure to a market oversupplied with more than 1 million tonnes of commercial stocks.

Concern about Chinese demand has weighed on London Metal Exchange copper prices, on track for the biggest weekly drop since mid-February.

Fu said copper capacity added in the second half of 2011 had increased operating rates this year amid sufficient supply of raw materials concentrate and scrap. He forecast April output at about 510,000 tonnes.

Zijin Mining Group Co Ltd began trial operations at its new 200,000-tonne-per-year copper smelter in Fujian in late 2011. The smelter is expected to produce about 120,000 tonnes of copper this year after operations were suspended in January because of an accident.

Primary aluminium production rose 2 percent from a month earlier to 1.568 million tonnes in March, the highest level since a record 1.59 million tonnes in June 2011. March output increased 9.4 percent from a year earlier.

In the first quarter, primary aluminium production rose 12.1 percent from a year earlier to 4.592 million tonnes.

Unlike global aluminium producers such as Rio Tinto Ltd and Alcoa Inc, which plan to cut output because of weak global prices, many large smelters in China are maintaining production as domestic prices are above cash production costs, said Yao Xizhi, analyst at state-backed research firm Antaike.

He forecast similarly strong output for April, estimating that nearly 2 million tonnes of new aluminium capacity had come onstream since the second half of 2011.

LEAD, ZINC, NICKEL

Production of refined lead, zinc and nickel rose in March to a three-month highs as smelters stepped up production after a break in late January to early February.

Refined lead output increased 12.3 percent to 346,000 tonnes from the previous month, but fell 6.7 percent from a year earlier, data showed. Sources at smelters said domestic lead demand had risen in March on higher production of lead-acid batteries, although some small smelters remained closed over environmental problems.

Zinc output gained 1 percent on a monthly basis to 406,000 tonnes in March, but fell 10.2 percent from a year earlier. Domestic demand for zinc has been weak this year as Beijing continues to clamp down on the domestic property sector, the top consumer of zinc-galvanised steel in China.

Production of lead and zinc is expected to rise after smelters in Hechi city in southwestern Guangxi region reopened this month after closing in February for pollution checks.

Nickel output rose 8.2 percent from February to 23,139 tonnes. A purchasing manager at a nickel producer said the scale of growth was unlikely to extend into in April as some stainless steel mills, the top nickel users, had cut production. (Editing by Chris Lewis)

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