Alcan in Talks to Raise Investment in China Aluminum Smelter

Nov. 6 (Bloomberg) -- Alcan Inc., the world's second- largest aluminum producer, is in talks to increase its investment with China's No. 2 maker of the lightweight metal to tap rising demand.

The Canadian company is ``looking at taking a larger position'' by investing in an expansion at state-owned Qingtongxia Aluminium Group, Cynthia Carroll, head of Alcan's primary metal group, said. ``We are very pleased with the progress that has been made.''

Alcan, which has a 50 percent stake in Qingtongxia's third production line through a joint venture, wants to increase market share in China, where demand is forecast to double by 2015. Swiss commodities trader Glencore International AG signed an agreement to buy a shares in Qingtongxia in August.

``We continue to look at other opportunities in China,'' Carroll said in an interview in Beijing on Nov. 3. ``Aluminum is the most sought-after metal in China.''

Aluminum for delivery in three months has risen 38 percent in the past year on the London Metal Exchange as economic growth in China, the fastest-growing major economy, increases demand for beverage cans and cars.

Alcan set up its joint venture with Qingtongxia, located in western Ningxia autonomous region, two years ago. The venture includes a 150,000 metric ton capacity smelter, or the No. 3 smelting line, and a coal-fired power plant.

``We are obviously still very much interested in the option on the No. 4 smelting line,'' which was completed last year and has a capacity of 250,000 tons a year, James Zhao, director in charge of Alcan's Asia primary aluminum business, said in e-mail response to Bloomberg News questions yesterday.

Glencore Interest

Baar, Switzerland-based Glencore, the world's biggest commodities trader, has signed an initial agreement to buy an unspecified stake in Qingtongxia, Merlin Wang, a company official at Beijing office, said on August 10.

``This news has no effect on Alcan's productive joint venture with Qingtongxia,'' Zhao said. ``We are not aware of the details of the Glencore-Qingtongxia deal.''

China's aluminum demand and supply ``will be in balance'' in a few years, said Carroll. Demand, which grew by more than 10 percent last year, will ``maintain similar growth rates over the next few years,'' she added.

The economy in China, the world's biggest producer and consumer of aluminum, expanded 10.4 percent in the third-quarter of the year.