Chalco turns in second straight profitable quarter

State-owned Aluminum Corporation of China Ltd (Chalco) reported its second consecutive profitable quarter today, buoyed by a rise in domestic prices for primary aluminium.

Chalco turned in a net profit of CN¥19.2 million (US$2.97 million) for the first quarter, which is down from a profit of CN¥48 million (US$7.74 million) in the first quarter of 2015 the firm said in a filing on the Shanghai stock exchange today.

The firm, which is the world’s biggest producer of aluminium, made a return to the black in 2015 after cutting costs due to record losses the year prior.

The year has been good so far for the primary aluminium market in the People’s Republic of China – the price of a front-month contract on the Shanghai Metal Exchange (which generally reflects domestic supply and demand of spot aluminium) leaped over seven percent in the first quarter of this year. Aluminium has continued its gain in the current quarter as well.

Aluminium’s gains in general and Chalco’s profitability in particular can be attributed largely to the Middle Kingdom’s production cuts of late last year, according to several experts. In the month of January, the year-on-year change was a drop in production by 4.5%, or 1,366 thousand metric tons, which was the largest decline in China’s year-on-year output in the past five years. February’s output of 2,070 thousand metric tons, though up from January’s numbers, continued the overall decline from production totals in December. China is expected to continue keeping production numbers relatively low, pledging to retain “a high degree of vigilance” against overproduction.

Chalco posted results after the markets in Hong Kong and China closed. Its Hong Kong shares ended down 0.7 percent today, behind the main Hang Seng Index’s rise of 0.1 percent. The firm’s shares in the Shanghai market ended the day down by 2.8 percent, somewhat greater than a 0.25 percent drop of the Shanghai composite index.

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