Zhuzhou Smelter to Post Biggest Half-Yearly Loss on Power Costs

BEIJING, July 7 -- Zhuzhou Smelter Group Co., China's biggest zinc producer, will probably post its biggest half- yearly loss after it wrote down inventories and power and coal costs rose. Shares dropped.

Net loss will be about 280 million yuan ($41.3 million) for the six months ended June 30, compared with a profit of 4.7 million yuan a year ago, the Hunan province-based company said late yesterday in a statement to the Shanghai stock exchange. That will be the biggest half-yearly loss since it was listed in 2004, according to data compiled by Bloomberg.

China raised power tariffs for polluting and energy- intensive industries this year, lifting production costs for aluminum and zinc smelters and forcing some plants to close. Zinc smelters in China, the biggest producer, have suspended as much as 8.8 percent of capacity, Shanghai Metals Market analyst Monica Gao said last month.

"Electricity and coal price hikes have increased processing costs, leading to reduced margins," Zhuzhou Smelter said in the statement. The company posted a first-quarter profit of 1.3 million yuan.

Zhuzhou Smelter fell as much as 3.9 percent, and traded down 3.4 percent to 8.52 yuan as of 11:04 a.m. in Shanghai. The stock has dropped 47 percent this year, worse than the 27 percent decline on the benchmark index.

The Chinese government's drive to curb a property bubble has hurt demand for industrial metals used in construction. Demand for zinc, used to galvanize steel, expanded 18 percent last year in China to more than 4.7 million metric tons, according to the International Lead and Zinc Study Group.

Zinc on the Shanghai Futures Exchange is down 28 percent this year, tumbling to as low as 13,480 yuan a ton on June 8, while London prices have declined 29 percent, the worst base- metal performer.

China Minmetals Corp., the nation's biggest metals trader, owns 47.76 percent of Zhuzhou Smelter.