The recently eased electricity supply problem and the rising price of raw material has resulted in increased fixed-asset investment in the aluminium smelting sector in the first two months of the year, which surged 124.2% compared with the same period last year. The government successfully reduced investment growth rate to 9.6% last year.

The Central Government is aware of aluminium oversupply in the domestic market and falling aluminium prices. Bauxite imports have increased dramatically this year as a result of increased alumina capacity and dull-aluminium smelting facilities resuming operation. There is also a new wave of hot-rolling lines being constructed in the aluminium processing sector, indicating that current aluminium product production is still low.   

The government has been rapidly working to eliminate out-of-date aluminium smelting capacity this year and plans to ban scrap-aluminium reverberator smelting that uses direct coal burning and crucible furnaces, secondary aluminium smelting projects with reverberators below 4 tonnes, aluminium smelting that uses fluoride, as well as aluminium smelting that has a carbon production of below 100,000-tonne annual capacity.

The government also intends to prevent self-baked cell facilities from resuming operation this year, companies attempting to operate such facilities will have their power and water supply forcefully disconnected.   

The NDRC has asked local governments to launch investigations and immediately halt illegal aluminium smelting, processing and mining projects, based on the aluminium industry restructure guideline released by the NDRC.

Each new electrolytic aluminium and alumina smelting projects, as well as mining project that has an investment of above RMB 500 million ($64.68 million) will be required to attain State Council approval prior to commencing operation.

According to the statement, the results of local clean-up activities are to be submitted to the NDRC by June 25, 2007.

Aluminium futures also settled higher on spill over strength from today's strong copper market, with the most traded July contract settling RMB70 ($9.06) higher at RMB 19,880 ($2,573.43) a tonne.