Chalco eyes Mideast plants to cut oil costs
Aluminum Corp of China (Chalco), China's largest aluminium producer, is in talks to build smelters in the Middle East to cut fuel costs as electricity tariffs increase in the mainland.
'Electricity is one of the major costs to make aluminium. We're considering building smelters in the Middle East to take advantage of its affluent oil and gas resources and lower our electricity bill,' chief financial officer Chen Jihua told BNP Paribas' 13th China Conference yesterday.
Chalco's plans to produce more aluminium overseas came after Beijing lifted tariffs a few times this year to ease rising coal costs at power generators.
Electricity costs make up between 30 per cent and 35 per cent of Chalco's total aluminium production costs, depending on the price of the raw material, alumina.
The average electricity tariff is 33 fen per kilowatt hour this year, slightly lower than the industry's average, Mr Chen said. To reduce and stabilise aluminium production costs, Chalco has been investing in power-related projects.
Mr Chen said the plan to build smelters in the Middle East is part of Chalco's strategy to expand overseas. It has made 'some progress' in efforts to become one of the world's major aluminium players, he added.
Chalco is also eager to invest in overseas bauxite projects to ensure supply over the next 10, 20 or even 50 years, he said.
Alumina is refined from bauxite and smelted into aluminium, which is used in the construction, automotive and packaging industries
Chalco, the world's second-largest alumina producer, won the bid of a A$3 billion (HK$17.7 billion) bauxite mining and refining project in Aurukun, Australia last month and is carrying out feasibility studies. Construction of the project is expected to begin in 2008 with production kicking off in 2010.
The firm is also looking at bauxite resources in Vietnan, Africa and North America, Mr Chen said.
Meanwhile, Mr Chen expects alumina spot prices to continue to fall next year but does not say whether the company plans to cut alumina prices further. The firm has slashed alumina prices by 48 per cent in the past three months.
