Chalco expects price recovery as domestic output growth slows
Aluminum Corp of China (Chalco), the mainland's largest alumina and aluminium producer, said domestic prices should remain steady or edge up slightly in the second half after a decline in the first six months.
The spot price for alumina was expected to range between 3,500 yuan and 4,000 yuan a tonne while aluminium should swing between 19,000 yuan and 22,000 yuan a tonne, chairman Xiao Yaqing said yesterday at a press conference.
Chalco's average alumina spot price slumped 33.6 per cent to 3,543 yuan per tonne in the first half, while its average selling price for primary aluminium fell 2.6 per cent to 17,122 yuan per tonne.
The company's first-half profit fell 5.15 per cent on the fallen prices.
The price for alumina will stabilise because domestic output growth is expected to slow, given that the price of imported bauxite, a mineral used in alumina production, has continued to rising, Mr Xiao said. On the other hand, demand for aluminium, which requires alumina to produce, remained strong, supporting prices.
The mainland produced 58.3 per cent more alumina in the first half, although the price of bauxite has tripled to 300 yuan per tonne this year.
Chalco has been less affected by the rising price of bauxite imports than other smelters because the company controls half of the mineral's resources in the mainland. It cost Chalco about 100 yuan to produce one tonne of bauxite, Mr Xiao said.
At the end of last year, Chalco had more than 650 million tonnes of bauxite resources, half of which were recoverable reserves. It won six bauxite mining rights in the first half, giving it access to 45 million tonnes.
Mr Xiao said the company's bauxite resources were enough to support 1,300 to 1,500 million tonnes of alumina output each year for more than 30 years.
Chalco's Hong Kong-traded H shares jumped 16.84 per cent to close at HK$15.54 yesterday, while its Shanghai-traded A shares surged by their 10 per cent daily limit to a record 43.66 yuan, extending strong gains since it posted better-than-expected first-half earnings.
