China's 20 biggest aluminium companies, led by Aluminium Corp of China Ltd, will form an alliance to negotiate alumina prices next year with global suppliers such as BHP Billiton to lower production costs.

The companies, including 19 smelters which account for more than 60 percent of the nation's aluminium smelting capacities, and China Minmetals Corp, China's biggest base metals trader, will meet early next month, said Wen Xianjun, an official with the China Nonferrous Metals Association.

Prices of alumina, a white powder refined from bauxite and used to produce aluminium, rose 36 percent to a record on November 18, according to London-based Metal Bulletin Plc. Rising alumina prices are causing losses for 80 percent of Chinese smelters, the association has said. China is the world's largest producer of the lightweight metal used in aircraft and beverage cans.

"The smelters are ready to cut production if they can't get lower alumina prices," said Wen, who is coordinating the group. "The negotiation alliance will be formed next month."

Alumina Corp, also known as Chalco, aims to keep its dominance of China's alumina market by bargaining lower prices for the smelters. Chalco controlled 46 percent of the nation's alumina supply and 87 percent of China's output of the material in the first nine months this year.

"These companies are in touch with us," said Zhao Jinhua, deputy general manager with Chalco's international trading unit.

China's alumina imports are likely to stay unchanged from this year due to the nation's increasing capacities, said Zhu Yan, an aluminium analyst with Beijing Antaike Information Co, a research affiliate of the nonferrous metals association.

She did not give the import forecast to this year.

China will increase alumina output by 2.5 million tons next year, enough to supply the additional aluminium output, the association's Wen said.

Two tons of alumina is used to smelt one ton of aluminium.

China is also the world's second-largest user of aluminium. The economy grew 9.5 percent in the first half, fuelling demand for the metal in construction, cars and home appliances.

(China Daily November 23, 2005)