This is a signal that the authority will start a new round of macroeconomic controls over the aluminum industry to cool down the rebound of overheated aluminum investment.

   The circular will also urge local governments to shut down aluminum projects that have not got authorization or violate China's industrial policy and outlays, and unreasonable industrial structure.

   It seems good news for the existing aluminum smelters in China, especially Aluminum Corp of China (Chalco, ACH.NYSE, 2600.HK), the biggest aluminum producer in China. As the entry into the industry will become stricter, less number of aluminum projects may appear so as to ease the severe competition in the industry. Besides, the rules will curb the excessive expansion of aluminum production so that the supply of aluminum products will not be boosted. 

   Statistics showed that fixed-asset investment of aluminum smelting sector rocketed by 124.2 percent in the first two months of 2007 while the ratio of sales and production fell down below 90 percent.