SHANDONG Xinfa Aluminum and Electricity Group, China's fourth-largest aluminum maker, may have to cut output as a shortage of coal threatens to disrupt power supplies, according to a company executive.

    There is a possibility the company can't get enough coal and is forced to shut aluminum cells, although it's extremely costly to do so, Fan Liangong, head of Xinfa's power generation department, said by phone from Chiping, Shandong Province, yesterday.

    Aluminum jumped to a record last month after Chinese producers agreed to cut output in an attempt to ease the sixth year of power shortages in the world's fourth-largest economy. A coal shortage has worsened the crisis in China, which gets 80 percent of its power supplies from coal-fired generators.

    "Coal is currently the single largest threat to China's power market and aluminum smelters," Gayle Berry, an analyst at Barclays Capital, said in an e-mailed note yesterday.

    China's coal price cap has exacerbated the domestic shortage by encouraging more exports, which doesn't help aluminum smelters that need large quantities of coal to operate their power plants, she added.

    "It's very hard to buy coal," Fan said. "We're doing all our best to ensure power supplies to our aluminum plants," which have been running normally so far. Like many of its competitors in the eastern province, Xinfa generates its own power to make the energy-intensive metal.

    Some aluminum smelters, particularly in Henan Province, have increased buying from the national grid because it is cheaper than buying coal to run their captive power stations, Berry said.

    Chinese thermal coal prices have more than doubled to a record this year as demand rises and the country closed small coal mines to improve the environment.

    Some Chinese aluminum smelters have cut production by more than the 10 percent agreed to last month and will limit output until the end of the year because of power shortages and weak export demand, Wen Xianjun, deputy chairman of China Nonferrous Metal Industry Association, said on Wednesday.

    Aluminum smelters in Shandong incur the highest output costs, between 17,500 and 18,000 yuan (US$2,624) a metric ton, in China because of higher coal rates.