Aluminium prices in China fell to a seven-year low on Thursday, adding to difficulties facing companies in the world’s largest producer.

China supplies more than half of the world’s aluminium, but a slowing economy and global glut of the lightweight metal have weighed on prices. Aluminium on the Shanghai Futures Exchange fell for the ninth day in a row and is down 30 per cent since the summer of 2014.

Goldman Sachs said this month that the aluminium market was “facing the greatest bearish fundamental shock in a generation, and perhaps in its history”.

The oversupply in China has hit global markets, with prices for aluminium on the London Metal Exchange at their lowest levels since 2009, touching $1,491.50 a tonne on Thursday.

Last month, Alcoa, the US producer, said it would split into two companies, separating its aluminium manufacturing and bauxite mining operations.

Analysts remain sceptical that China’s aluminium producers will close capacity, even as they continue to make losses. They say that production continues to be added in the west of the country, where coal-based power is cheaper.

A further 3.5m to 4m tonnes per year of low-cost smelting capacity is expected to come online in the next 18 months in China, according to Nicholas Snowdon, an analyst at Standard Chartered. China was expected to have a surplus of 1.4m tonnes of aluminium next year, he said.

State-owned Chalco, or Aluminum Corporation of China, the country’s largest producer, said this month that it would shut a 50-year-old smelter in northern Gansu province. At more than 500,000 tonnes per year, it represents about 14 per cent of the company’s capacity, according to Helen Lau, an analyst at Argonaut in Hong Kong.

Chalco’s shares have fallen 17 per cent this year in Shanghai, but rose 3.6 per cent on Thursday.

Jiang Yinggang, Chalco vice-president, said in a visit to the Liancheng plant that although the company had benefited from reduced raw material and electricity prices, it was “powerless” in the face of the aluminium price, according to a copy of his speech on the website of the China Nonferrous Metals Industry Association. The plant would have “bled to death” if it continued, he said.

“We are facing the most important period in the history of the company,” he said.

Liancheng, which does not have its own power plant but buys from the grid, made a cumulative loss of Rmb1.2bn between 2008 and 2014. Cost of production including tax this year had been Rmb13,860 per tonne, higher than the national average of Rmb12,840, Mr Jiang said.

Aluminium prices in Shanghai traded at Rmb10,645 a tonne on Thursday.

But Edgardo Gelsomino, an analyst at Wood Mackenzie, who visited Liancheng in 2012, said that there was likely to be pressure from the local government to halt the closure.

“When you have these plants in remote locations it becomes difficult because the whole community around the area lives on that plant. The aluminium smelter was everything there,” he said.

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