Chalco surges after raising alumina price

PUBLISHED : Tuesday, 04 August, 2009, 12:00am
UPDATED : Tuesday, 04 August, 2009, 12:00am

Shares in Aluminum Corp of China (Chalco) surged 7.21 per cent yesterday after the company raised the spot price of alumina for the third time this year, as the latest economic data showed manufacturing activity on the mainland was expanding.

China's biggest alumina and aluminium producer raised its spot alumina price 4.3 per cent to 2,400 yuan (HK$2,723) a tonne, effective July 31, the company said on its website.

It was the third increase this year after a 4.55 per cent rise in April and 10 per cent in January.

Zhang Qing, Chalco's investor relations manager, said earnings would improve in this half given surging demand and prices for aluminium.

Chalco had warned earlier it might post a loss for the first half of this year after posting a loss of 1.89 billion yuan for the first quarter.

Ms Zhang declined to say whether the company could return to profit in the second half.

Chalco gained 65 HK cents to close at HK$9.67 yesterday. The stock has risen 137 per cent this year.

Shanghai aluminium futures have gained 19 per cent so far this year to nearly 15,000 yuan a tonne, finally exceeding smelters' production costs, prompting them to restart idled capacity, said Sabrina Xie Lulu, an analyst at Guotai Junan.

The futures surge also boosted demand for alumina, the raw material in making aluminium, Ms Xie said.

However, she said high stockpiles of aluminium would hinder a further rise in aluminium prices.

The mainland's official purchasing managers' index rose to a seasonally adjusted 53.3 in July from 53.2 in June, indicating manufacturing activity was expanding, the Federation of Logistics and Purchasing reported.

Helen Lau, an analyst at OSK Securities, said domestic investment expansion and increasing manufacturing activity should continue to drive China's economic recovery.

And aluminium, a key industrial metal used in the construction, power and transport sectors, would be a beneficiary of the economic growth, she said.

Overseas demand for mainland aluminium has resumed recently, with a 128 per cent month-on-month jump in exports of the metal in June.

The demand growth should be sustainable 'on the back of a slow but certain global economic recovery down the road', Ms Lau said. It would help alleviate oversupply concerns about aluminium in the domestic market, she said.

Demand revival

Mainland aluminium exports in June jumped month on month by: 128%