China's major non-Chalco alumina producers jointly lifted spot alumina prices by 7.14% today, from RMB 4,200 ($577.72) per tonne to RMB 4,500 ($618.98) per tonne, due to tight alumina supply and high bauxite prices in the domestic market, a company official told Interfax on Friday.

"China's tight alumina supply is the result of low stockpiles and increased demand from stockpiling in the lead-up to the Chinese New Year. The recent move by NALCO (India's National Aluminum Co. Ltd.) to increase its alumina bidding price by $30 per tonne to $432.32 per tonne was also partly responsible for the move," a Shandong Weiqiao sales department official, who wished to remain anonymous, told Interfax.

A total of nine domestic non-Chalco alumina producers, including Shandong Weiqiao Aluminum & Electricity Co. Ltd and Henan Kaiman Aluminum, raised their spot alumina prices to RMB 4,500 ($618.98) per tonne today, while the Aluminum Corporation of China Co. Ltd. (Chalco) [NYSE:ACH], the nation's largest alumina producer, has left spot prices unchanged at the previous level of RMB 4,200 ($577.72) per tonne.

"Increased stockpiling from aluminium smelters in the run-up to the Chinese New Year festival, along with hiking bauxite prices, are the main reasons behind the alumina price increase. Alumina supply in the domestic market has been tight for the last few months, and recent stockpiling has only exacerbated the situation," China Commodity Marketplace analyst Shan Guibin told Interfax today.

The Shanxi provincial government's recent policy to consolidate all local bauxite mines with an annual capacity of less than 10,000 tonnes by August 2008 is also contributing to high bauxite prices in the domestic market. The local government has increased resource taxes and environmental protection charges for small-scale mines in order to encourage them to either shut down or consolidate, the Shanxi provincial government announced at the end of December last year.

"An alumina per-tonne-price of RMB 4,500 ($618.98) will definitely give aluminium smelters a harder time, and although the hope of an eventual price reduction may maintain current production levels, there is a definite possibility that they will cut production in the coming period. Chalco will be keeping a weather eye on how the new price affects the market, and may readjust prices in the future," Shan said.

Chinese aluminium smelters' profits are currently coming under pressure from the increased price of both alumina and electricity. Moreover, the majority of aluminium smelters face further electricity price hikes this year, as the government moves ahead with its plan to curb consumption by energy-intensive industries.

The aluminium spot price dropped RMB 45 ($6.19) per tonne to RMB 17,865 ($2,457.36) per tonne in Shanghai today, and there is still an ample supply of aluminium in the domestic market due to new capacity coming online in the second half of last year.

Shan predicts that alumina supply and demand will be relatively balanced in China this year, with average alumina prices set to fluctuate between RMB 3,500 ($481.43) per tonne and RMB 3,800 ($522.70) per tonne. China's alumina capacity will increase by 5 million tonnes this year, while aluminium capacity will increase by 2 million tonnes.