Reuters reported that China's oversupply of aluminium is likely to escalate in the H2 of 2013 as more new capacity is set to come onstream further reducing the need for imports by the world's top consumer and producer of aluminium.

Smelter sources said the stronger than expected consumption experienced in the H1 of 2013 would be maintained but did not expect further growth this year. Imports have already tumbled 67% in the H1 from a year earlier.

Mr Zhang Chenguang analyst at information provider SMM said that China's mounting supplies would also weigh on domestic prices, which AL-A00 CCNMM have fallen more than 5% so far this year.

Beijing has tried unsuccessfully to limit aluminium capacity and last month further tightened regulations for new and existing smelters. Analysts and smelter sources said the regulations would not cut production this year but would limit expansion in the longer term.

According to the Ministry of Industry and Information Technology, China has more than 27 million tonnes of annual capacity currently. Some 10 million tonnes of capacity was being built.

Analysts expect China to add more than 3 million tonnes of new aluminium smelting capacity this year and the bulk would come from the northwestern remote region of Xinjiang.

Mr Zhang said that in Xinjiang at least 1.3 million tonnes of capacity would start up in the H2 compared with around one million tonnes of new capacity in China in the H1.

An executive at a large smelter said that some new power plants in Xinjiang would also be completed in the H2 of 2013 prompting smelters to start new aluminium capacity there. Output growth would speed up in the second half, mostly from Xinjiang.

Consumption in the H1 had risen about 10% from a year earlier as demand from the construction, home appliance and transport sectors grew.

A senior executive at an aluminium user in the northeastern province of Shandong that buys primary metal to manufacture semi finished aluminium products said the firm would more than double its capacity to 2 million tonnes this year.