Chalco lifts alumina price to play catch-up
Aluminum Corp of China (Chalco), the world's second-largest maker of alumina and the country's biggest aluminium smelter, yesterday raised its spot alumina price 8.3 per cent, the second increase this year, to catch up with global prices.
The Beijing-based company said spot prices of alumina, the semi-processed material used to make aluminum, had risen to 3,900 yuan per tonne from 3,600 yuan. It raised the price 50 per cent last month.
Despite the increases, Chalco's alumina price is still way below 5,650 yuan before it cut the price four times last year amid rising supply and growing competition.
The new price was only slightly below the spot imported alumina price, which was about 4,000 yuan per tonne at mainland ports, JP Morgan analyst Zhang Feng said.
Mr Zhang said Chalco's move was surprising as international spot prices were falling.
He believed spot alumina prices should come under pressure as capacity growth remained strong in the next two years, especially in the mainland.
Global alumina refinery capacity was expected to jump 12 per cent to 85.36 million tonnes this year and reach 94.19 million tonnes next year, JP Morgan said.
Mr Zhang forecast that the average international spot alumina price would fall 39 per cent to US$300 per tonne this year from last year's US$492 and decline a further 13 per cent next year to US$260.
Mr Zhang, who has a 'neutral' rating on Chalco, said the latest alumina price rise would not have much impact on the company's earnings.
This is so because as a percentage-point change in the spot alumina prices should translate to about 0.2 per cent of this year's earnings per share and 0.3 per cent of next year's earnings per share in the same direction, he said.
Shares of Chalco rose 0.64 per cent to HK$7.82 yesterday.