Chinese smelter forges ahead

SHANGHAI - A Chinese metals contractor plans to move ahead with a deal potentially worth US$1 billion ($1.4 billion) to build and design a 420,000-tonne-per-year aluminium smelter in Australia, despite doubts about the project's viability.

China Nonferrous Metal Industry Foreign Engineering and Construction Co (NFC) agreed last week to begin engineering and design work for the Aldoga smelter in Central Queensland, it said yesterday in a statement in the China Securities Journal.

If it goes ahead, the smelter would be China's largest engineering project in Australia.

It had been one of the deals signed during Chinese President Hu Jintao's visit to the country in 2003. Beijing is encouraging investment in overseas raw materials projects to feed the country's rapid industrial growth and keep its factories churning out exports.

Now, NFC has the option to build and equip the smelter for about US$1 billion. The initial agreement - which follows a similar one a year ago - must be finalised within six months, the Chinese firm added.

The Aldoga smelter project was halted this year due to increases in construction and shipping costs, Australian media had reported.

A lack of raw material sources also dogged the project, they said. Aluminium is smelted from alumina.

"It's not in our best interest at the moment to lock in alumina supplies, given the high price of alumina," said Aldoga general manager Brett Smith. "We are negotiating supply agreements for both alumina and carbon anodes."

The smelter will adopt NFC's smelting technology, he said.

Site-clearing for the smelter began in 2003, and construction was slated to begin in late 2005, according to Aldoga's website.

NFC has received almost US$600 million in export credits from China Import-Export Bank for the project, said board secretary Du Bin. It had committed US$2 million to preparatory work.

Earlier this year, Brazil's Companhia Vale do Rio Doce inked a framework agreement with Aluminum Corp of China (Chalco), China's biggest bauxite, alumina and aluminium producer, to build an alumina refinery in Brazil.

- REUTERS