BEIJING, Aug. 25 -- Aluminum Corp. of China Ltd., the nation's biggest producer of the metal, posted a third quarterly loss as the global recession drove down prices, and demand for the metal used in packaging and cars plunged.

    The loss was 1.6 billion yuan ($234 million) for the three months ended June 30, compared with a profit of 1.1 billion yuan last year, according to figures derived from the Beijing-based company's half-yearly statement. That compares with the 700 million yuan loss expected by Macquarie Group analysts.

    Chalco, as the company is known, slashed output and cut spending after prices plunged 35 percent last year. Aluminum has surged 32 percent in Shanghai this year after the government bought the metal to limit losses for smelters, and a 4 trillion yuan stimulus package improved auto and building demand.

    "Aluminum prices in the second quarter were still below Chalco's production costs," Sabrina Xie, Shenzhen-based analyst at Guotai Junan Securities Co., said before the statement. "Investors already expect bad results for the first half. They are looking for the second half, or even longer term in 2010."

    Chalco has more than doubled in Hong Kong trading this year, making it the third-best performer of the 42 members of the Hang Seng Index. The stock gained 3.4 percent to close at HK$9.21 in Hong Kong before the announcement. In Shanghai trading, it rose 2.8 percent to 15.58 yuan.

    "The company faced unprecedented challenges in the first half as the financial turmoil deepens and aluminum demand and prices dropped," the company said.

    Capacity Usage

    The loss for the first half was 3.5 billion yuan, or 0.26 yuan a share, compared with a profit of 2.4 billion yuan, or 0.178 yuan a share, a year ago, the company said in the statement. Sales dropped 29 percent to 28 billion yuan.

    Chalco was running 67 percent of alumina output capacity and 83 percent of aluminum capacity as of June, the statement said. The company reduced alumina production by 32 percent from a year ago to 3.2 million metric tons, it said. Aluminum production was 1.6 million tons.

    Governments' spending in China and the U.S. is boosting demand for aluminum, Alcoa Inc., the largest U.S. producer of the metal, said July 9. Chalco raised prices of alumina, used to make aluminum, for the third time this year as demand recovered.

    China's industrial output gained 10.8 percent in July from a year ago, the National Bureau of Statistics said Aug 11. Car sales soared 70.5 percent, the biggest jump since January 2006.

    Aluminum Prices

    Aluminum futures averaged 12,977 yuan a ton in Shanghai in the quarter, compared with 19,060 yuan in the same period of last year.

    Still, aluminum prices may be slower to gain than other base metals because of high global inventories, Chalco Chairman Xiong Weiping said July 23. Aluminum inventories monitored by the London Metal Exchange quadrupled in the past year to a record 4.6 million tons.

    "Investors favored Chalco as they expected the economy to recover," said Guotai's Xie. "If the economy recovers strongly, metals demand will improve. If the economy recovers slowly, aluminum smelters won't have an advantage because there's still too much supplies. Unlike copper smelters, the aluminum market is still in big surplus."

    Chinese aluminum smelters, the largest in the world, have restarted more than 2 million tons of smelting capacity and a further 4 million tons may still be idle, Wang Feihong, analyst at a unit of China Minmetals Corp., the country's biggest metals trading company, said July 2.

    (Source: Bloomberg)