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It was said from smelter officials on Monday that the power operator in Henan province has warned local aluminium smelters that its power supplies to the smelters may fall due to local power shortages.

“The power bureau called us on Sunday asking us to prepare for production cuts at our smelter since the local power supply is tightening,” an administration official at a large smelter in Henan told Reuters.

“I can imagine they would call others.”A manager at another large smelter in Henan said the company had received calls from the power operator on Sunday and Monday about warnings of power supply cuts.

Henan, the top primary aluminium producing province in China, has more than 4 million tonnes a year of aluminium smelting capacity.

China is the world’s top producer and consumer of the metal.

It is reported that Chinese aluminium smelters have agreed to pay more for imported alumina in 2010, a move that will reduce margins as they scurry to secure feedstock for new capacity.

Term prices for imported alumina will rise to 14.5 percent to 15 percent of the price of aluminium on the London Metal Exchange, currently at $2,250 a tonne, per tonne of alumina.

The pricing, on a free-on-board basis, is equivalent to $326-$337 per tonne based on Wednesday’s aluminium prices. It takes two tonnes of alumina to make one tonne of refined metal.

In 2009 the ratio was 13.5-14.5 percent for the bulk of term imports.

Smelters expecting higher production next year were keen to secure term alumina, given sharp gains in international spot prices to $340-$350 per tonne to Chinese ports versus about $265 in July.

“Chinese smelters’ output expansions are running ahead of local alumina expansions,” a smelter official said.

But only top alumina producer Aluminum Corp of China Ltd was willing to supply term alumina in the country, forcing smelters to look overseas.

Smelters had paid 15-18 percent of aluminium prices on the Shanghai Futures Exchange for Chalco’s term alumina in the past 3 years and would pay 17 percent for next year’s shipments, they said.

Chalco, with an annual capacity of 4 million tonnes of primary aluminium and 11 million tonnes of alumina, had restarted all its idle alumina and aluminium capacity, company officials said last week.

Smelter and trading sources said increased term bookings were likely to raise China’s imports of alumina, the main material for production of the metal, next year from this year’s likely imports of over 5 million tonnes.
Higher imports would trim an expected surplus in the international market next year but could weigh on domestic spot prices.

State-backed research group Antaike has predicted China’s primary aluminium production would rise 25 percent to 17 million tonnes next year after an expected 0.2 percent rise this year, due to expanded capacity.

Alumina consumption is expected to rise 23 percent to 33.9 million tonnes and production to increase 26 percent to 30 million tonnes, which would leave a deficit of 3.9 million tonnes.

Chinese spot alumina prices have risen over 30 percent so far this year, to 2,650-2,700 yuan per tonne on Wednesday.

It is said from its president on Friday that Chinese metals conglomerate, Aluminum Corporation of China , is on the lookout for opportunities to acquire mining assets overseas as it restructures amid fierce competition.

The firm will also seek joint ventures and strategic cooperation with suppliers of resources, energy and raw materials, Xiong Weiping told a conference.

China’s aluminium industry has entered a phase where there is overcapacity, cut-throat competition and low margins, he said.

“Chinalco must adopt profound business restructuring in order to maintain our leadership in the industry,” he also said.