Chinalco invests in Harbin factory

Chinalco Northeast Light Alloy Co, which provides aluminum alloys to the aviation and defense industries, will spend more than 5 billion yuan ($729 million) to build a new plant as it tries to meet rising demand.

Construction of the 200,000-ton-a year alloy plant in Harbin, Heilongjiang province, began on Tuesday and it is due for completion in 2011, Beijing-based Chinalco said in a statement on its website.

The plant will produce aluminum plates and strips widely used in the defense, petrochemicals, transport and machinery industry.

Chinalco Northeast expects annual profit of 400 million yuan and sales of 7 billion yuan once the plant is operational, the statement said.

Song Huaibin, an analyst at Guoyuan Securities, said the new plant is part of the nation's push to change its aluminum product structure and export more high value-added aluminum products.

The nation's aluminum supply has exceeded demand this year, Song said.

Total domestic output of electrolytic aluminum in 2008 is expected to increase 15.4 percent to 14.5 million tons, which would exceed the projected demand of 14 million tons by a small margin, according to statistics.

The nation exported 621,001 tons of unforged aluminum from January to August, up by 68.3 percent on a yearly basis, according to Customs figures.

However, the country currently imports some high-end aluminum products, and that might have been a key factor in the decision to build the new plant, Song said.

Xiao Yaqing, general manager of Aluminum Corp of China, or Chinalco, said the company supplies 80 percent of the aluminum alloys used in aircraft, atomic reactors, nuclear weapons, satellites and missiles for the defense industry.

State-owned Chinalco, the parent of the Hong Kong-listed Chalco, is China's biggest producer of aluminum. It acquired 75 percent of Harbin-based Northeast for 1.2 billion yuan last September.

The new plant is expected to boost production and create jobs in the region, Song said.

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