Aluminum Corp of China Ltd (Chalco), the country's largest
aluminum producer, yesterday posted net profit of 8.4 billion yuan
for the first nine months.
But the company said its profit margin dropped from 28.1 to 23.7
percent at the end of the second quarter as aluminum product prices
fell.
Year-earlier figures were unavailable because the company began
posting quarterly profits this year.
Analysts said declining prices of aluminum products on the
domestic market and growing processing costs have combined to
shrink profit margins.
The average spot price of aluminum ingots, a major product
processed by Chalco, dropped 600 yuan, or 3.2 percent, from the
second quarter to 18,000 yuan per ton.
The aluminum product price slump has also been reflected in
falling futures prices. The most actively traded aluminum futures
contracts for delivery in January 2008 on the Shanghai Futures
Exchange dropped an aggregate 1,190 yuan, or 6.5 percent, since
late July to close at 18,270 yuan per ton yesterday.
In addition to falling sale prices of aluminum products,
processing costs - including for bauxite ore, coal and electricity
- have risen sharply, further squeezing profitability in the past
few months.
Much of the added cost has to be absorbed by the company as
exports of aluminum products slow due to the increase in export
duties.
"The decline in exports coupled with the increase in production
capacity have combined to drive down the profitability of all
Chinese aluminum producers," said Yang Baofeng, an analyst at
Orient Securities.
China's aluminum product exports from June to September dropped
46 percent from the previous year to 117,000 tons, according to the
latest figures.
Meanwhile, China's output of aluminum products in the first nine
months surged 34.2 percent year-on-year.
Analysts said the downward trend in spot prices of aluminum
products would continue in the fourth quarter, which will add
pressure to the profit growth of aluminum producers.
Chalco's A shares on the Shanghai Stock Exchange rose 4.04
percent yesterday to close at 50.01 yuan, while its H shares on the
Hong Kong bourse shed 0.87 percent to close at 22.75 yuan.
(China Daily October 31, 2007)
