Aluminum Corp of China (Chalco) aims to deliver a full-year profit by cutting production costs by up to 5 per cent in the second half through improved energy efficiency and higher self-sufficiency. 'If aluminium prices do not experience any drastic falls, we should be profitable in the second half,' chief financial officer Chen Jihua said yesterday. His comments came a day after the nation's largest maker of aluminium posted a second quarter net loss of 96.7 million yuan (HK$110.4 million) as higher product prices were more than offset by higher power costs. The company also had a 300 million yuan inventory write-down. The first quarter had produced a profit of 627.25 million yuan. To ensure Chalco returns a profit it will cut alumina production costs by 100 yuan a tonne or 5 per cent, and that of aluminium by 250 yuan a tonne or 2.4 per cent in the second half. This will be achieved by replacing outdated plant and greater reliance on self-mined bauxite. Aluminium is smelted from alumina, an intermediate product refined from bauxite. Chalco has just started up two major alumina plants in the resource and energy-rich western region, which should improve its overall energy efficiency and cut power bills - one of the plants is a joint venture with a hydropower producer. Electricity accounts for over a third of Chalco's operating costs. According to a JP Morgan research report, 60 per cent of Chalco's smelting capacity benefits from lower power costs thanks to co-operation with energy producers. The 'go west' strategy is important for Chalco, as Beijing's cancellation of preferential power prices for energy-intensive industries in May will exert cost pressure on the company in the second half. A power price increase last November has already raised costs so far this year. JP Morgan analyst Nathan Zibilich estimated Chalco's average power costs would rise 9.5 per cent this year, or 1.78 billion yuan. To counter this, the company aims to build two to three coal production bases with total reserves of 3 billion tonnes within three years, to part-supply its needs which stand at 20 million tonnes this year. Also, in a move away from the oversupplied aluminium sector, Chalco will also invest US$1.35 billion in its 45 per cent-owned iron ore mine in Africa's Guinea. Chairman Xiong Weiping said the mine would start production in 2012 with annual capacity of 1 million tonnes, but Zibilich noted that it may start up as late as 2014 given risks of delays due to undeveloped infrastructure and economic instability.