Chalco warns of change in competitive landscape after return to the black

PUBLISHED : Wednesday, 19 March, 2014, 1:25am
UPDATED : Wednesday, 19 March, 2014, 1:25am

Aluminum Corp of China (Chalco) posted a net profit of 975.2 million yuan (HK$1.2 billion) for last year, reversing an 8.2 billion yuan loss the previous year, mainly due to asset disposals.

The firm also cautioned that smelters in the central and eastern regions of the mainland might be squeezed out of the market by more competitive plants in western areas.

The country's largest producer of the lightweight industrial metal said mainland smelters would continue to cut output amid low aluminium prices, which favours smelters in the west with lower energy costs.

"The industry will shift to [the] western regions as falling competitiveness of the central and eastern regions saw smelters face pressure to exit the market," Chalco said in a statement to the Shanghai stock exchange.

"In the short term, industry oversupply still persists and product prices have been falling, which gave tremendous challenge and pressure to Chalco."

The turnaround at Chalco was possible because of gains worth 7.7 billion yuan notched by selling its stake in a bauxite project in Guinea, Africa, and loss-making mainland smelting and processing plants to its parent. It also bought coal-mining assets from its parent.

Operating loss in its alumina operation narrowed by 52 per cent to 1.8 billion yuan and that of its aluminium operation shrank 9.5 per cent to 27.9 billion yuan. Inventory write-down fell to 1.38 billion yuan from 1.4 billion yuan in 2012.

Chalco said it aimed to turn around its loss-making units this year by "phasing out, restructuring, transferring and digesting" them, without giving details.

Output of aluminium fell 9 per cent last year to 3.84 million tonnes, while that of alumina grew 2 per cent to 12.1 million tonnes and that of bauxite rose 14.4 per cent to 16.2 million tonnes.