The State-owned Aluminum Corp of China has shelved a plan to acquire a majority stake in the aluminium operations of Shandong Nanshan Industrial Co Ltd, senior officials for both companies said.

But industry officials said Aluminum Corp, China's largest producer of the metal used in drinks cans, car bodies and window frames, is expected to sign an agreement soon to buy a stake in a new smelter owned by Shanxi Guanlu Co Ltd. Neither company confirmed this.

Aluminum Corp is also China's chief producer of alumina through its Hong Kong-listed arm, Aluminum Corp of China Ltd.

A senior company official would not confirm why talks with Nanshan - which began about two years ago - have stalled.

The Nanshan official said late on Thursday: "Our talks have stopped. It is possible that we will restart in the future, but we don't know."

Nanshan had capacity to produce 165,000 tons of primary aluminium and was building a further 200,000 tons, another company official said.

The first Nanshan official added the company was planning to build a refinery to produce alumina, the powder from which the metal is made, in China's eastern province of Shandong.

Beijing last week approved a blueprint for the aluminium industry, calling for strict control of new capacity, integrating smelters with fabricating plants and tying them to power sources, a report by the National Development and Reform Commission said.

Industry officials expect the blueprint to trigger mergers and acquisitions of smelters in the next few years.

Xiao Yaqing, who chairs the listed arm and is the general manager of Aluminum Corp, said last month the company was in talks with a few aluminium smelters in China for acquisitions, with 300,000 to 400,000 tons of capacity involved.

Industry officials said Shanxi Guanlu would set up a new firm to hold 200,000 tons of new aluminium capacity and would sell a 50 per cent stake to Aluminum Corp. They didn't provide the price.

Guanlu and a power operator in the northern province of Shanxi would take another 50 per cent stake, they said.

(China Daily September 17, 2005)