China's biggest alumina miner boosts production and uses more of the raw material itself to offset reduced returns Aluminum Corp of China, the world's second-largest alumina producer, said it produced 27 per cent more of the raw material for aluminium in the third quarter while output of the metal surged 73.6 per cent as it expanded capacity, largely through acquisitions. Alumina production reached 2.26 million tonnes for the three months to last month with an average selling price of 4,037 yuan per tonne, up 7.7 per cent from the same period last year, the Beijing-based company said. However, the third quarter average selling price does not fully reflect recent price cuts, analysts warned. Alumina shortages pushed prices to a multi-year high of US$628 a tonne in mid-April, before they began retreating as new capacity started coming on stream in China, increasing the supply dramatically. Chalco, which has a near-monopoly on mainland alumina production, has slashed alumina spot selling prices by 48 per cent over the past three months to 2,950 yuan per tonne. Chalco's competitors added to the glut, boosting their output to six million tonnes this year and 9.68 million tonnes next year from 1.5 million tonnes last year, Citigroup said in a report earlier. This would cut Chalco's market share to 60 per cent this year and 50 per cent in 2010 from 93 per cent last year. Alumina prices will continue to slump, Chalco's chief financial officer Chen Jihua said last week, though he declined to say whether the company plans additional price cuts. In response to falling raw materials prices, Chalco has been aggressively expanding its aluminium smelting capacity, aiming to boost the percentage of its alumina output it uses internally to 70 per cent to 80 per cent over the next few years from about 40 per cent currently. Chalco projected that global aluminium prices will remain strong through year's end. Aluminium will trade for between US$2,300 and US$2,600 per tonne on the London Metals Exchange, the company said. The benchmark three-month LME aluminium contract was quoted at US$2,728 in early London trading. Mainland aluminium production is expected to reach 9.1 million tonnes, surpassing demand of 8.6 million tonnes. Shares of Chalco fell 0.55 per cent to close at HK$5.41 yesterday. The stock has lost more than 38 per cent from a record high in April on concerns over falling alumina prices.