Chalco Falls 3.4% as Energy Costs Cut Profit Forecast

Aluminum Corp. of China Ltd., the country's largest producer, slumped to the lowest in three weeks after saying third-quarter profit will plunge by more than half because of higher costs and lower demand and product prices.

The Beijing-based company, also known as Chalco, fell 3.4 percent to close at 8.32 yuan, the lowest since Sept. 18, in Shanghai. Its Hong Kong shares didn't trade today because of a public holiday.

Slower economic growth and the global credit crisis are undermining demand for property and automobiles, which require aluminum. China's largest makers of the metal agreed to slash output more than a 10th from August because of power shortages.

``Chalco's profit may decline as the weakness in the property and automobile industries stays in place,'' said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co., which oversees the equivalent of $285 million.

Aluminum, copper and zinc futures plunged in Shanghai today, extending limit-down losses yesterday as the nation's financial markets reopened after a week-long holiday.

``Price hikes of raw materials and fuel including energy increased our production cost,'' Chalco said late yesterday in a filing to Hong Kong's stock exchange. Financial turmoil and the global economic slump ``brought about significant price falls of our products,'' it said.

Rising Costs

Chalco's profit for the third quarter of 2007 was 2.04 billion yuan ($298 million,) according to Chinese accounting standards. Chairman Xiao Yaqing warned Sept. 2 that full-year costs will exceed last year's profit of 10.2 billion yuan after they surged in the first half.

China, fighting a sixth year of power shortages, raised electricity charges in the second half. Energy coal prices jumped 41 percent in the first-half from a year ago after the government closed small mines and demand from utilities increased.

Passenger car sales in China fell 6.2 percent in August, the first drop in more than three years. House prices in China's 70 major cities fell 0.1 percent in August from July. Morgan Stanley has warned the real estate market could face a ``meltdown.''

The company also yesterday reduced spot alumina prices for the third time in five months because of falling demand. The charge was lowered 9.4 percent to 2,900 yuan a metric ton, effective Oct. 1, according to a Web site statement. Alumina is used to make aluminum.

Aluminum Decline

Chalco has slumped 52 percent in the past three months in Hong Kong trading as aluminum on the London Metal Exchange dropped 31 percent. In comparison, the benchmark Hang Seng Index of Hong Kong stocks is down 23 percent.

Commodity prices may extend their declines into the second quarter of next year because global economic growth is slowing, according to Tim Mercer, chief investment officer of Hong Kong- based hedge fund Musashi Capital Ltd.

Chalco's American depositary receipts fell 6.6 percent to $13.30 in New York yesterday. One ADR represents 25 of the Hong Kong shares, suggesting a per-share price of HK$4.13, down from their Oct. 6 close of HK$4.25.

Copyright and Exemption Declaration :¢ÙAll articles, pictures and videos that are marked with "China Aluminum Network" on this website are copyright and belong to China Aluminium Network (www.alu.com.cn). When transshipment, any media, website or individual must list the source from "China Aluminium Network (www.alu.com.cn)". We seek legal actions against anyone that disobey this. ¢ÚArticles that marked as copy from others are for transferring more information to readers, do not represent or endorse their opinions or accuracy and reliability. When other media, website or individuals copy from our website, must keep the source. Anyone that changes the articles' sources will hold the responsibilities for copyright and law problems. We also seek legal actions against anyone that disobey this. ¢ÛIf any articles copied by our website concern the copyright and other problems, please contact us within one week.