China's aluminum smelters, the largest in the world, has cut production by more than 10 percent and will limit output until the end of the year because of power shortages and weak export demand, an industry official said.

    Producers have exceeded reductions agreed last month and will extend the accord by three months, Wen Xianjun, deputy chairman of China Nonferrous Metal Industry Association, said Wednesday in a phone interview with Bloomberg News. Prices of the metal rose Wednesday.

    Aluminum jumped to a record last month on China's production cut, aimed at helping the world's fourth-largest economy combat a sixth year of power shortages. Higher gas prices have curbed output globally, with producers scuttling expansion plans in Abu Dhabi and Bahrain.

    "The worst time for Chinese aluminum smelters is yet to come," Wang Feng, a Shanghai-based analyst with Everbright Securities Co, said by phone on Wednesday. "Demand is extremely bad and the production cuts may last longer than expected."Aluminum for three month delivery rose 0.9 percent to US$2,925 a ton on the London Metal Exchange at 11:31am London time on Wednesday. The metal is used to make beverage cans and parts in cars and planes.

    Wen didn't say how much the smelters cut output. The 10 percent reduction accord equates to about 3 percent of the nation's production last year.

    China produced 12.6 million tons of the metal in 2007. Global production was 38 million tons, according to Citigroup Inc.

    "The power situation is worsening," Wen said from Beijing. Higher electricity rates and weakening demand have made some smelters unprofitable, he said. Power accounts for between 30 percent and 40 percent of the costs of an aluminum smelter.

    Smelters in Henan, China's largest aluminum-making province with a capacity of 3 million tons, and Guizhou Province are becoming unprofitable because of costlier power, said Wan Ling, a Beijing-based analyst at research body CRU International Ltd.

    China is grappling with power shortages caused by economic growth that averaged more than 10 percent annually in the past 5 years. Government control of power prices means utilities can't afford to buy enough coal. Worsening the shortfall, thousands of small and unsafe coal mines have been shut.

    Everbright's Wang cut his China aluminum production estimates by 7.1 percent to 14.3 million tons for this year. Demand may grow less than 10 percent, from last year's almost 40 percent, he said.

    Rio Tinto Group, the world's second-largest aluminum producer, said on July 22 that a US$3 billion project in Abu Dhabi was "dead" because the United Arab Emirates decided not to use its gas supplies to generate power for smelters. In February, Manama-based Aluminium Corp of Bahrain said it shelved a plan to increase capacity by 39 percent to 1.2 million tons because of insufficient gas supplies.

    A 16-percent jump in natural-gas prices, used by electricity providers in the Persian Gulf, has persuaded governments in the region to shift the fuel to output liquefied natural gas instead of aluminum.

    The canceled Mideast smelters would have raisedworld supplies by 2.8 percent. Even with those projects production wouldn't have kept pace with global demand of 9 percent a year, twice the rate of the world's economy.