Platts reported that rising logistics costs are spurring Shandong's aluminum industry to increasingly shift operations towards the coast.

A analyst with state run metals information provider Beijing Antaike said that "Building new aluminum processing plants along Shandong's coast can help producers save greatly in logistical costs as they can buy materials from suppliers in the area."

The source said that "The cost of shipping bauxite from Australia to China has hit USD 14 per tonne from USD 3 per tone to USD 4 per tonne in late 2008, so it is inevitable aluminum plants will set up bases nearer the coast to trim costs."

Projects planned near Shandong's port city of Qingdao include a 150,000 per year high precision aluminum foil plant by Loften Aluminium Foil Company and a CNY 6 billion alumina plant by the Aluminum Corporation of China or Chalco, the capacity of which has not been disclosed.

A company source said that Loften's plant is expected to be completed by 2012. The source said that "We chose to build the new plant in Qingdao to trim material sourcing costs."

Loften sourced aluminum plate and strip for its current 45,000 tonne per year aluminum plant in the province from Henan and Shanxi provinces until 2008, when it switched to local suppliers and slashed its logistics costs by CNY 150 tonne to CNY 50 per tonne.

A commodity analyst with Beijing Capital Futures Company said that "Aside from Chalco, which has its own alumina plant in Shandong, plants have to import material from overseas, so setting up new production bases in Qingdao can help cut logistic costs."

State statistics showed that Shandong's alumina output totaled 6.56 million tonnes and its refined aluminum 1.6 million tonnes in 2008 up 3% and 31% respectively, from 2007. The province has a total alumina capacity of 13 million tones per year and refined aluminum capacity of 4 million tones per year.

(Sourced from Platts.com)