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Chalco May Break Even in Second Half, Xiong Says
Dec 7,2009 13:16CST
industry news

SHANGHAI, Aug. 25 -- Aluminum Corp. of China Ltd., the nation's biggest producer of the metal, may break even this half, rebounding from three straight quarterly losses, as market conditions improve, Chairman Xiong Weiping said.

    "The aluminum market will gradually recover in the second half," Xiong told reporters today at a press conference in Shanghai, adding that the Beijing-based company is aiming to at least curb the run of losses.

    Chalco, as the company is also known, may benefit from the 31 percent rebound in the Shanghai aluminum price this year. The company has raised prices of alumina three times this year as the government bought aluminum and the 4 trillion yuan ($585 billion) stimulus spending improved auto and building demand.

    "Chalco has been restarting some capacity in response to higher prices and better profitability," Citigroup Inc. analyst Catherine Wang said in an e-mailed note. "This would result in higher-than-expected volumes this half and thus higher profit if the situation sustains."

    Chalco, which has more than doubled in Hong Kong trading this year, fell 3.2 percent to HK$8.92 at 11:00 a.m. local time. In Shanghai trading, it dropped 3.7 percent.

    The lightweight metal may trade between $1,800 and $2,300 a metric ton this half on the London Metal Exchange, President Luo Jianchuan said at the same conference. Aluminum closed yesterday at $1,927 a ton.

    Net Loss

    Chalco had a net loss of 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 company's half-yearly statement. That compares with the 700 million yuan loss expected by Macquarie Group Ltd. analysts.

    Government spending in China and the U.S. is boosting demand, Alcoa Inc., the largest U.S. producer of the metal, said last month. China is the biggest consumer of aluminum.

    China's aluminum demand may reach 12.85 million tons this year while production may be 13.2 million tons, Luo said. He didn't give a comparison. Alumina, refined from bauxite ore, is used to make aluminum.

    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.

    Chinese aluminum smelters 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.

    Chalco was operating 67 percent of its alumina capacity and 83 percent of aluminum capacity as of June, the company said yesterday. It reduced alumina production by 32 percent from a year earlier to 3.2 million metric tons. Aluminum production was 1.6 million tons, according to the statement.

    (Source: Bloomberg)

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