China's Shanxi Guanlu Aluminium is planning to expand ingot capacity by 100,000 mt/year on its existing 200KA line with 70,000 mt/year capacity currently, a company official told Platts Tuesday.

"We plan to start the expansion works this year, after the Chinese New Year holidays (in mid-February), which will raise the line's capacity to about 170,000 mt/year when completed," he said. "We have no set deadline for completion yet as there's still a lot of paperwork to clear, such as final approvals and project tenders. But we expect it will take at least a year from startup for full completion," he added.

Shanxi Guanlu currently operates three ingot production lines. Besides the line with the planned expansion, it has a 75KA aluminium production line with a 40,000 mt/year ingot capacity which will not be expanded in the near future, the official said. The third, a 300KA line with a 200,000-220,000 mt/year capacity, is a joint-venture plant with the Aluminum Corp of China (59% stake). This is operated under the joint-venture plant Shanxi Guanlu Huasheng Aluminium, in Yuncheng city, Shanxi province, which started production in April 2006 and produced around 120,000 mt for 2006.

"Total output last year was affected by high alumina costs in the earlier part of the year, and the joint-venture line was also started up late in April. But this year, we aim to reach for full output on all the lines," the official said. He did not give detailed output figures for 2006 as "the numbers are still being compiled."

In 2006, the company had shut down its 40,000 mt/year line for most of the year due to high alumina costs in the first half of the year. The line was shut down in December 2005 and restarted in October 2006, and output was expected to reach just around 4,000 mt for last year. Shanxi Guanlu had also expected to produce a full 70,000 mt from its 200KA production line.

Import prices stood around $600-630/mt CIF China in late 2005 to early 2006, but has since fallen to the current $230-240/mt CIF China by late 2006. Domestic alumina prices peaked around Yuan 5,650/mt ($715) in 2006, but currently stands at around Yuan 2,300-2,400/mt.

"Alumina prices are much lower now and expected to remain low...market demand also remains very strong, so it's quite a good time to expand," the official said. "Although the government changed export policies last year and increased export taxes on aluminium, we are not too concerned as we have some tie-up with China Minmetals this year and they will help us to export," he added, but declined to give further details.

Shanxi Guanlu exported about 20-30% of output from its own two production lines in 2006 and expects to maintain that level in 2007, the official added.

Meanwhile, the company is facing a slight delay in the completion of its planned power plant, which was originally expected to be ready in September 2007. "There are some funding issues so we may not complete the plant until 2008...we're not definite yet," the official said. Works on the power plant started in March 2006. When ready, the new power plant is expected to lower the company's power costs to Yuan 0.25/kWh, compared with the current cost of Yuan 0.342/kWh. "The new plant will also help to supply power to our planned expanded capacity," the official added.