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China Hongqiao to restart shuttered aluminum capacity in replacement plan

Tom Daly

* Hongqiao to replace around 540,000 T of smelting capacity

* Replacement capacity includes 600 kA line shut in 2017 - sources

* Firm to produce 6.3-6.35 mln T of aluminum in 2019 - brokerage

BEIJING, April 18 (Reuters) - China Hongqiao Group , the world's biggest aluminum producer, will this year restart some of the smelting facilities it was forced to shut in 2017, two sources with knowledge of the matter said on Thursday.

The move will allow the company to replace aging production lines with newer technology, including a high-performing 600 kiloampere (kA) potline, and will keep its total capacity roughly the same,

Hongqiao, which has licensed capacity of 6.46 million tonnes per year of aluminum, closed 2.68 million tonnes of illegal capacity in mid 2017, after being ordered to do so by the provincial government in eastern China's Shandong.

It will disassemble 543,000 tonnes of capacity this year and replace it with 542,000 tonnes, according to an April 15 document published by Shandong's Department of Industry and Information Technology.

China's Ministry of Industry and Information Technology allows aluminum companies to replace or acquire smelting capacity as long as they stay within quotas.

Hongqiao's "new" capacity is part of the 2.68 million tonnes shut in 2017, the two sources said, declining to be identified because they were not authorized to speak to the media.

Hongqiao referred questions to a note by Chinese brokerage Industrial Securities, which also said the new capacity belonged to that shut in 2017, but declined further comment.

The capacity to be replaced will be dismantled from June to December this year, according to the Shandong government document, which says the new capacity can start up when a corresponding amount has been removed.

Despite the switch, Hongqiao's production guidance for 2019 is still a very high 6.3-6.35 million tonnes of aluminum, according to the Industrial Securities note.

Hongqiao said in February around 100,000 tonnes of aluminum production was affected by curbs on industrial output during the 2018/19 winter.

Chinese aluminum consultancy Aladdiny said in a note this week it understood Hongqiao had restarted less than 200,000 tonnes of the annual capacity it closed for the winter because of the impending capacity replacement. (Reporting by Tom Daly; Editing by Mark Potter)