Aluminum Corporation of China Ltd, Chalco, the nation's largest
producer of the metal, yesterday announced an 8.5 percent price
rise for alumina, leading to speculation that profit margins of
industries that rely on the raw material could be squeezed.
According to the statement posted on the company's website,
Chalco increased the price of alumina to 3,800 yuan per ton from
3,500 yuan.
Alumina is the raw material for the production of electrolytic
aluminum, which is the basic material used for aluminum-based
products for the construction and auto industries.
Analysts said the price hike by Chalco was in tandem with the
uptrend of imported alumina, which has increased by more than 40
percent since February to $430 per ton.
Industrial experts said the price increase would put pressure on
many aluminum-processing companies because much of their profit is
expected to be wiped out by the rising costs in a weak market.
"The rising material cost and the declining price of processed
aluminum products will combine to squeeze the profit margins of
many downstream enterprises," Liu Minda, an analyst on non-ferrous
metals at Huatai Securities, said.
Jin Yu, general manager of the Keao Aluminum Company of Yanzhou
Mining Group, told China Daily the company had no plans to
cut its production in the near future despite the cost
increase.
"The increased material cost will inevitably shrink the profit
margin of processors," Jin said.
"But we have no plan to reduce our production, because we are
confident that we can absorb the cost increase."
Shandong-based Keao is one of many aluminum processing companies
in China.
The most actively traded aluminum futures contracts for February
delivery on the Shanghai Futures Exchange, SHFE, dropped 10 yuan,
to 18,150 yuan per ton. The contracts have tumbled an aggregate 1.9
percent during the past two weeks.
Li Jingyuan, an analyst at Haitong Futures, predicted that
Shanghai aluminum futures prices would recover next week.
(China Daily November 28, 2007)
