This move may last for several months, and its purpose is to give smelters a greater say in the domestic aluminum market. Smelters currently believe that the market is dominated by dealers.
The increase in domestic primary aluminum prices may lead to a decline in the export of semi-finished aluminum products in China.
Smelter industry sources said that after the Spring Festival holiday, China's large aluminum smelters began to limit the sale of spot aluminum, and smelters had previously discussed joint action during January.
Strong domestic aluminum prices may benefit aluminum producers such as Chalco, Zhongfu Industrial and Henan Shenhuo. a
A trader from other aluminum producers said: “When the price is below the target, the smelter will limit the shipment.”
The trader did not specify the target price, but analysts expect it to be 13,000 yuan ($2,080) per ton, just below the current Shanghai aluminum futures price level. Many smelters face losses if the price is below this level.
Traders and smelting industry sources said that the limited sales of aluminum is mainly raw aluminum ingots.
A senior executive from a medium-sized smelter said that some large Chinese smelters are also pushing for joint production cuts.
China's aluminum industry is once again facing an oversupply this year, with only 1 million tons of new capacity in the first quarter, although many smelters suffered losses last year.
As the world's largest aluminum producer and consumer, China has tried to cut capacity in the past decade but failed to succeed. China's primary aluminum production in 2014 was 24.4 million tons, an increase of 7.7% year-on-year.
Affected by restricted domestic sales news, the Shanghai Futures Exchange's main contract has risen more than 4% from the record low of 12,555 hits in mid-January to 13,090 yuan.
In contrast, LME aluminum has fallen more than 4% year-to-date and hit $1,775.5 on Tuesday.