Interfax-China reported that China intends to improve the structure of its nonferrous metals industry, promote overseas investment and control output volumes under the 12th Five Year Plan (2011-2015) for the sector released by the Ministry of Industry and Information Technology January 31st 2012.

China will continue to encourage aluminum and magnesium smelters based in areas that suffer from energy shortages to move to western areas with abundant energy supplies and resources. At the end of 2010, western China accounted for about 51% of national aluminum output and 50% of magnesium output up by 5 percentage points and 3 percentage points from 2005, respectively.

Although the National Development and Reform Commission called a moratorium on all new aluminum projects in April 2010 in a bid to reduce overcapacity, projects in western areas such as the Xinjiang Uyghur Autonomous Region have continued to get the go ahead.

Mr Zhang Xi analyst of Luzheng Futures said that the domestic aluminum industry is blighted by serious overcapacity and had a utilization rate of only 70% in 2010. A utilization rate of around 90% is healthy while a figure below 85% indicates problems.

Mr Ye Xin an analyst with Essence Securities said that the 5 year plan also aims to increase the concentration of copper and nickel smelting bases in coastal areas. China is highly reliant on imports of the two metals and such a move will help reduce freight costs. Imports account for more than 80% of China's copper concentrate consumption.

Mr Ye said that copper smelting capacity is currently concentrated in the landlocked provinces of Jiangxi and Anhui in central China and Yunnan Province in the southwest. Anhui based Tongling Nonferrous Metals Group enjoys lower production costs than fellow state owned smelters Jiangxi Copper and Yunnan Copper due mainly to its proximity to the coast and the national financial and shipping center of Shanghai.

He said that China will also encourage investment in overseas production of alumina, aluminum, copper, lead, zinc and nickel in the next 5 years. While many domestic companies are eyeing merger and acquisition opportunities abroad, few have yet begun building factories outside China.

(Sourced from Interfax-China)