Profit plunges at China¡¯s Chalco

Aluminium Corporation of China (Chalco), the country¡¯s largest producer, said third-quarter earnings slumped 93% as metal prices dropped and slowing economic growth hurt demand.

Net income fell to 182,9-million yuan ($27m), or 0,014 yuan a share, from 2,29-billion yuan, or 0,191 yuan, a year earlier, Chalco said in a statement to the Hong Kong Stock Exchange, citing domestic accounting standards. Sales dropped 7,9% to 19,1-billion yuan.

Chairman Xiao Yaqing is shutting plants and curbing expenditure to counter a 22% drop in the metal price this year as China¡¯s economy grows at the slowest pace in five years.

Alcoa, the largest US aluminium maker, posted a 52% fall in third-quarter profit this month.

Chalco¡¯s shares have lost 85% this year in Hong Kong trading, worse than the 55% drop in the benchmark Hang Seng index.

The Beijing-based company forecast on October 6 that third-quarter profit would drop more than 50%.

On Wednesday last week it said that it would cut annual aluminium production capacity by 18%.

China International Capital¡¯s Ding and JPMorgan Chase expect Chalco to post a loss in the fourth quarter.

Aluminium futures dropped by more than a fifth this year to 13,825 yuan a ton on Friday on the Shanghai Futures Exchange.

Chinese smelters have an average production cost of between 18000 and 18500 yuan a ton, according to JPMorgan.

United Company Rusal, the world¡¯s biggest smelter of aluminium, said this month that 75% of producers in China, Europe and the US were unprofitable after the price plunged.

Aluminium demand will gain 6% this year, less than an earlier forecast of 8%, according to Alcoa estimates.

North American demand would fall 10%, and Chinese growth would slow to 15%, trailing an expected 22%, the company said on October 8.

Chalco cut spot prices of alumina ¡ª used to make aluminium ¡ª three times in five months due to falling demand. It had reduced alumina production capacity by 10%, a company official said on October 15.

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