Aluminum Corp of China Ltd, the nation's largest producer of the metal, believes first-half profit will fall by more than 50 percent because of higher costs and production disruption from snowstorms.
Raw material and fuel costs rose from a year earlier, the Beijing-based company said in a statement to the Hong Kong stock exchange last Friday.
It posted a profit of 6.4 billion yuan (US$930 million) in the first half of 2007, Bloomberg News reported.
Chalco closed some smelters in February because of the country's worst snowstorms in five decades. The firm, hurt by falling product prices and higher material costs, will have to pay more for power next month after the government raised prices.
Inflation concern
"Increasing fuel costs are hurting Chalco and other smelters' margins," said Helen Wang, a Shanghai-based analyst with DBS Vickers Hong Kong. The "outlook for Chalco remains cautious in the next six months, mainly because of cost-inflation concerns."
Chalco stock fell 2.6 percent to close at HK$10.32 (US$1.32) in Hong Kong last Friday. The announcement came after the market closed. The stock is down 36 percent this year as brokerages, including Macquarie Group, cut earnings estimates or downgraded it.
The Chinese mainland will boost electricity prices by an average 4.7 percent from July 1 to rein in energy consumption.
The move will raise the cost of production by between 200 yuan and 300 yuan for each ton of metal, Zhang Qing, a corporate affairs manager at Chalco, said last Friday from Beijing. Power accounts for between 30 percent and 40 percent of the operating costs for aluminum smelters.
(Shanghai Daily June 23, 2008)
