However, people familiar with the matter said that in the short term, the smelter is expected to further reduce production, which may suppress the price down.
There are rumors that the annual production capacity of the smelter is expected to decrease by 600,000-700,000 tons in the short term. Due to the weak domestic aluminum prices, this rumor has been rampant in the past month.
But so far, only the smelter of Beijing Xinheng Group has confirmed the reduction of production capacity.
The company’s insiders said on Monday that it had completely shut down one of the two aluminum smelters in Qinghai province for technological upgrading.
The plant can produce 500,000 tons of primary aluminum per year, with an annual capacity of 350,000 tons in 2014.
Due to poor market conditions, Xinheng Group cut its operating rate by 200,000 tons/year at the beginning of this year and closed the remaining 150,000 tons of capacity on Tuesday.
Market participants have different views on other capacity reductions. Some believe that this month has cut production capacity by 650,000-700,000 tons/year, while others believe that only half of the above capacity is cut.
“Since the Xinheng Group has reduced its production capacity, this trend may have begun. People are waiting for a leader and then watching other people follow up,” said a source at a Henan smelter.
However, rumors of reduced production by smelters have not brought much support to domestic aluminum prices. Compared with the total capacity of about 40 million tons per year, the production is very small.
However, several market participants said that the cut in production may weigh on domestic spot alumina prices due to lower demand and lower aluminum prices.
On Monday, the ex-factory price of Henan alumina was 2,360 yuan ($386) per ton, unchanged from last Friday and a week ago.
The spot alumina price in Shanxi Province is also expected to be stable at 2,310-2,330 yuan per ton, and the ex-factory price in Guangxi is about 2,250-2,280 yuan per ton.
The Shanghai Futures Exchange's August aluminum contract closed at 12,210 yuan per ton, down from 12,395 yuan last week, also lower than 12,740 yuan a month ago.