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Chalco cuts aluminum production in line with prices

(Xinhua)
Updated: 2008-10-24 13:53

The Aluminum Corporation of China Ltd (Chalco), the country's largest aluminum producer, said on Wednesday it would cut production in line with falling demand and prices.

The total capacity reduction would be 720,000 tons a year or 18 percent of the company's annual production, said a company statement.

It would reduce or stop electrolytic aluminium production in several regions, including East China's Shandong Province, Henan and northern Liaoning and Inner Mongolia. A statement on Chalco's website said those areas had relatively higher business costs.

The Beijing-based company declined to tell Xinhua whether or not the production cut would lead to layoffs.

An official surnamed Su with the State-owned Assets Supervision and Administration Commission of the State Council, also declined to discuss the job situation.

Worldwide aluminum prices dropped more than 30 percent in the past three months. The current price is about $2,000 per tonne on the London Metal Exchange (LME).

The rising stockpile at futures markets contributed to weakening the price, said market analysts.

Aluminum stockpiled on the LME 1.496 million tonnes and on Shanghai Futures Exchange 204,700 tonnes on Wednesday, up 63 percent and 60 percent since the beginning of the year, respectively.

Stockpiles are inventory that can be used as emergency supply. Consumers can use stockpiles stored in hundreds of warehouses located around the world when the supply and demand is out of balance.

Chalco said it would likely further reduce production in the coming months.

"The company's move to reduce production is expected to prevent aluminum prices from suddenly dropping in the near future, but it is not likely to stop a slump in the long term," said Zhengbin, an analyst with Xinhua Futures Brokerage Co Ltd.

The company's net profit dropped 65.56 percent to 2.4 billion yuan ($350.4 million) in the first half, according to its half-year report.

Chalco was listed on the Shanghai Stock Exchange in 2007. Its shares lost 1.32 percent on Thursday to close at 6.71 yuan.