China Aluminum to Spend $2 Bln to Double Output (Update1)
By Rob Delaney
11/03 23:54
quote.bloomberg.com
Beijing, Nov. 4 (Bloomberg) -- Aluminum Corp. of China, the world's third-largest producer of the metal, said it will spend 17.8 billion yuan ($2.17 billion) to double its smelting capacity and ensure jobs for its 68,000 workers.
With help from its third-largest shareholder, Alcoa Inc., the company, known as Chalco, began upgrading projects designed to raise annual aluminum smelting capacity to 1.39 million metric tons by 2005, said Corporate Secretary Ding Haiyan.
Chalco is trying to avoid the protests sparked in other industries by the firing of more than 26 million workers over the past four years as China tried to improve efficiency at state-run companies and make them competitive with overseas rivals. The expansion would probably add to a world glut of the metal that's dragged down prices, analysts said.
``Part of our expansion strategy is to avoid having our integration with the international market harm the interests of our staff,'' Ding told delegates at a non-ferrous metal conference in Beijing. ``We want to ensure there aren't any instances of instability.''
In the rust-belt city of Daqing, more than 10,000 fired oil workers blocked the city's main street in March and clashed with police, demanding better severance terms. Last month, fired oil workers staged sit-in protests at Chuandong Oil Exploration & Drilling Co., in Chongqing, southwestern China, according to the Hong Kong-based China Labor Bulletin.
A 7 percent drop in world aluminum prices in two years is adding further impetus to Chalco's need to reduce its cost-per-ton of produced aluminum. Prices for aluminum delivered in three months on the London Metal rose 1.8 percent to $1,374 at ton on Friday.
Chalco's first-half profit fell 42 percent to 572 million yuan because of the slump in aluminum prices. Its stock has fallen 35 percent to 91 HK cents since trading started on the Stock Exchange of Hong Kong on Dec. 12.
Adding to Glut
``Globally, smelters are trying to increase capacity to spread production costs to keep the factory going,'' said Geoffrey Cheng, an analyst at HSBC Securities, who has a ``sell'' recommendation on Chalco. ``It's pretty negative in terms of the price outlook.''
Aluminum production capacity in China more than doubled between 1995 and 2001 to 3.95 million tons, according to Antaike Information Development Co., an arm of China's metals industry association. That's a growth rate of about 13 percent a year, against economic growth of about 8.1 percent.
Chalco's expansion will also boost its production of alumina, which is smelted to make aluminum, by a third to 6.04 million tons by 2005.
``The increase in aluminum production has had an effect on international prices,'' said Tang Deyu, a deputy manager at Guangzhou Jinchuang Trade Co., which exports aluminum and copper. ``We'll see domestic oversupply within the next five years.''
As of June this year, aluminum smelter upgrades, expansions and new construction add up to more than 2 million tons of annual capacity, according to Dong Chunming, Antaike's chief analyst.
Copper production capacity rose to 1.18 million tons last year, up from 700,000 in 1995, Dong said. |
