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Chalco Second-Half Profit Misses Analyst Estimates on Fuel Costs

Offers of Minor Metals in Europe (2011-3-1)

(Bloomberg)--Aluminum Corp. of China Ltd., the country&rsquo;s biggest producer of the metal, posted a second-half profit that missed analyst estimates as higher prices and sales were undercut by rising costs.
Profit for the six-months ended Dec. 31 was 247.4 million yuan ($37.6 million), according to Bloomberg calculations. A Bloomberg survey of 13 analysts estimated the half-year profit to be 429.7 million yuan. The Beijing-based company, known as Chalco, had a loss of 1.1 billion yuan in the same period of 2009.
The rising cost of coal and the removal of preferential electricity rates eroded the profit of aluminum producers including Chalco. While the metal&rsquo;s price rose 11 percent last year, coal prices at Qinhuangdao, a Chinese benchmark, gained as much as 34 percent, according to data compiled by Bloomberg. Chalco buys coal to generate power at some plants. Electricity accounts for 40 percent of production costs.
&ldquo;Chalco&rsquo;s production costs remained at a very high level&rdquo; despite rising aluminum prices, Goldman Sachs Group Inc. analysts Julian Zhu and Steven Tao wrote in a report today. &ldquo;Any further investments in its alumina/aluminum business would likely not be profitable in the near term,&rdquo; they wrote.
Chalco fell 2.7 percent to trade at HK7.48 at 10.05 a.m. in Hong Kong. The stock has gained 5.6 percent this year, compared with a 1.1 percent increase in the benchmark Hang Seng Index. Shares in Shanghai rose 2.6 percent to 11.03 yuan.
The cost of sales rose 64 percent last year, the company said in a statement late yesterday. China&rsquo;s government has limited electricity use, which curbed aluminum output. Full-year profit was 778 million yuan on sales of 121 billion yuan, the statement said.
United Co. Rusal, the world&rsquo;s biggest producer, expects the price of aluminum to rise to $2,700 a ton in 2012. Global demand for aluminum may rise 8 percent this year, while Chinese demand likely growing 12 percent, the Moscow-based producer said in January. 
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