China's aluminium producers are finding it "harder by the day" to obtain letters of credit (L/Cs) for raw material alumina imports as banks tighten credit.

Aluminium smelters are also facing a combination of problems, including an oversupplied market, falling metal prices, and a weaker Chinese currency.

Imports trimmed

Several producers have postponed taking shipments and cut spot alumina imports according to news reports.

The main problems for aluminium smelters are the oversupplied market and cash flow difficulties.

Bank squeeze

But L/Cs have become harder to come by because many banks in China have cut back on lending to aluminium producers by as much as 20 per cent.

This is mainly a result of efforts by Beijing seeks to trim surplus capacity across several metals industries, including steel and copper as well as aluminium.

Cash flow problems

An executive at a large Chinese smelter says producers are finding it harder by the day to get L/Cs from banks. "The whole industry is having a problem of cash," he told local media.

A banker at China Minsheng Banking Corp said it has cut back on lending and was limiting L/Cs for heavily geared aluminium companies.

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