Yang Mei, the majority owner of Zhao Feng Aluminium in the northern province, expected the first phase of the alumina refinery to start production in two years.
"(Capacity) will be 400,000 tonnes," a Yang Mei official said of the first phase.
Company officials said Yang Mei aimed to build the refinery in three equal phases with eventual capacity of 1.2 million tonnes but did not provide further details or say when it would be complete.
Most of the first-phase alumina, the key raw material for power-intensive aluminium production, will supply Zhao Feng, which has the capacity to produce 120,000 tonnes of the metal, the officials said.
Two tonnes of alumina are needed to make one tonne of aluminium. China imports about half of its alumina needs.
Yang Mei was also building a thermal power plant with a generating rate of 400,000 kilowatts per hour to cover the needs of its aluminium subsidiary, they said.
The power plant would start production in the second half of 2005, they added.
China's red-hot economy, which grew 9.7 percent in the first half of this year, has left its power generation capacity lagging.
"We cannot expand our aluminium capacity now because of power shortages. We will start planning the expansion after the completion of the power plant," another company official said.
He added the company aimed to boost capacity of the smelter to 500,000 tonnes in the future.
"Power shortages affected aluminium production in the first half. The smelter will produce 100,000 to 110,000 tonnes this year," he said. The smelter started production in mid-2003.
Aluminium Corp of China Ltd said last week power shortages and the government's measures to cool economic growth could cause about three million tonnes or a third of the country's total capacity of the metal to be idled by the end of this year.
The state controlled company is China's largest aluminium producer and dominant supplier of alumina.