Chalco prepares for pressure on prices in the second half

ALUMINUM Corp of China (Chalco) expects volatile and downward pressure on domestic aluminum prices in the second half on fiercer competition and slower demand, its chairman said yesterday.

Prices may average as low as 18,000 yuan (US$2,632) a ton during the period, Xiao Yaqing said. Shanghai futures prices for the metal averaged 19,275 yuan in the first half.

An oversupply in the domestic market has forced leading players to cut production to prevent a price slump. "The weak prices and higher power tariffs may press on planned capacities from coming on stream too significantly in the second half," Xiao told a press conference on the firm's interim results.

Chalco posted a 66 percent drop in first-half earnings, blaming rising production costs and output disruption.

Meanwhile, Xiao said Chalco's parent, Chinalco, of which he is also the head, hadn't decided whether to increase its stake in Anglo-Australian miner Rio Tinto, which it bought early this year to diversify into other metals.

Chinalco and Alcoa Inc announced in February that they had bought a 12 percent stake in London-listed Rio Tinto Plc, or 9 percent of the Rio Tinto Group, the target of a hostile takeover from rival miner BHP Billiton.

A tie-up between Rio and BHP could give them the upper hand in iron ore price negotiations with Chinese mills.

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