CICC forecasts further alumina price cut on shrinking demand

Aluminum Corp of China announced recently to cut its spot alumina price by 9.4% from CNY 3,200 per tonne to CNY 2,900 per tonne starting from October 6.

China International Capital Corporation holds that as the demand for electrolytic aluminum decreases, its price has dropped remarkably and the output is squeezed. As a result, the demand for alumina is slashed.

CICC deems that the price will keep a slow-paced decline in the future. On the one hand, the alumina demand will continue shrinking to further press the price; on the other hand, the current alumina price has been almost close to the production cost that would become a strong support to the price and slows down its downward pace.

Although the price cut is expected to place limited impact on Chalco as the spot alumina profit only makes up 15% of the total, CICC predicts that the Chalco's 3-quarter performance will be lower than market expectation on sliding electrolytic aluminum price and high energy cost. Therefore, CICC will continue cutting its forecast for Chalco's 2008 profit.

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