Chalco Liancheng to close

Chalco has announced that it will gradually close its Liancheng plant, with a loss of about 520,000 tonnes.

The announcement was worded very diplomatically, using terms such as flexible downsizing, and that workers would get fair compensation. But it also made clear that Chalco would mothball all of the plant’s 500KA cells. We think the reason for the careful choice of words was done in order to protect sensitive negotiations with the local Gansu provincial government. The announcement made no mention of whether the government had approved the closure. We think Chalco has perhaps positioned the closure with the government in terms of sharing the pain, maintaining flexibility and bringing the plant back on line as soon as possible.

The closure will take place over the next 6-7 weeks.

It’s interesting that the market took almost no notice of the loss of 500,000t of metal. When I last checked at lunch time, SHFE metal prices remained around RMB11,700 a tonne.

The Chalco Liancheng plant is not Chalco’s best plant, although it is one of the newest. The plant was meant to be a showcase for 500KA and 600KA cells, but all the rumours say that there had been ongoing problems. I understand the 600KA cells were demolished many months ago. It’s also not Chalco’s most inefficient plant - the Zunyi plant runs at a much higher cash cost, but is only half the size of the Chalco Liancheng plant.

It is - or was - Chalco’s second biggest smelter with only the Baotou plant in Inner Mongolia rated higher, at 550KT.

Acknowledgements to www.panoramio.com for the image.