Southwestern China's Guangxi Zhuang Autonomous Region, a hub of aluminum and alumina producers, will increase electricity prices for local aluminum smelters in line with a government policy aimed at curbing investment growth in energy-intensive industries, a local government official told Interfax today.

"The aluminum smelting sector is the largest electricity consumer in Guangxi. We will start to implement the policy as soon as we get approval from the National Development Reform Commission (NDRC)," the official added.

The local government has decided to increase electricity prices among aluminum smelters by RMB 0.043 ($0.006) per kilowatt hour this year, following Beijing's call for local governments to increase average electricity prices for energy-intensive industries by at least RMB 0.02 ($0.003) per kilowatt hour in 2008, a Guangxi provincial government price monitoring department official, who asked to remain anonymous, told Interfax.

Currently, electricity consumption by domestic aluminum smelters is between 14,500 and 15,000 kWh per ton produced, with electricity prices averaging between RMB 0.36 ($0.049) and RMB 0.40 ($0.055) per kWh.

China's policy of increasing electricity prices will further decrease the profit margins of aluminum smelters in 2008, given the pressure they are currently facing from soaring alumina prices, Wang Weidong, a senior analyst with Beijing Antaike Information Development Co. Ltd., said.

"The Chinese government is determined to curb investment growth in the aluminum smelting sector, so aluminum smelters will face production cost growth and lower profits in 2008, despite the fact that domestic consumption is to remain strong throughout the year," Wang said.

Zhou Zhuowei, an analyst with Galaxy Securities in Beijing, predicts that China's aluminum production growth will slow down this year, as aluminum smelters without their own power station and bauxite mines are likely to quit the market if aluminum prices fall even further.

China's primary aluminum output will grow by 21.8 percent year-on-year in 2008, lower than the growth in output of 35 percent in 2007, Zhou said.

Aluminum benchmark futures prices at the Shanghai Futures Exchange (SHFE) have fallen by 7 percent by yesterday since Aug. 1, 2007, when China introduced a 15 percent export tax on some types of aluminum semis.

Wang said that the export tax policy has led to a rise in domestic supply, which has kept domestic aluminum prices down.