Chalco to cut production costs in bid to return to full-year profit

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This will be achieved by replacing outdated plant and greater reliance on self-mined bauxite.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.