State-owned aluminum majors in China to consolidate

By  Paul Ploumis 07 Sep 2015  Last updated at 02:55:37 GMT

Two Chinese aluminum businesses are in talks to consolidate thier operations, as part of government's initiative to bring together state-owned enterprises.

BEIJING (Scrap Monster): As part of consolidation of state-run organizations, China is in process to bring together its two biggest aluminum businesses. The consolidation of operations by state-owned State Power Investment (SPI) Corp and Aluminum Corp of China Ltd (Chinalco) is expected to give birth to world’s largest aluminum making business.

According to reports, SPI is in talks to shift its aluminum assets to with Chinalco. SPI, which is currently suffering from supply glut, wishes to idle its aluminum division by transfer of assets to Chinalco. However, talks on transfer of assets have been on for almost two months now and have reportedly made no progress. Sources indicate that Chinalco has expressed its unwillingness to purchase high-cost smelters. However, transfer of assets would boost Chinalco’s aluminum processing capacity to over 7 million metric tons per year. This would help the enterprise to become the world’s largest producer of the metal, pushing Rusal to second spot.

The Chinese administration aims to restructure the operations of its underperforming state-owned enterprises. However, analysts point to several issues that could damage the merging attempts. Merging rivals in the same industry may turn out to be difficult. Furthermore, this could also lead to potential job losses. The administration plans to cut the total number of government-run state-owned enterprises from current 111 to as low as 40. Meanwhile, conflicts between government departments and enterprises are seen largely delaying the consolidation attempts.

Meantime, government statistics indicate that the total profits at central government-owned SOEs declined considerably by 4.5% to 1.005 trillion yuan (USD 157 billion) during the period from January to July this year.