Chalco Lowers Aluminum Capacity

Aluminum Corporation of China, Ltd. (ACH), or Chalco, is the third-largest alumina producer in the world by output. The company expects to benefit from the long-term growth of the Chinese economy as well as through capacity expansion, acquisitions, and joint ventures.

Chalco is investing in its own mine production and is also diversifying its production base by expanding overseas. However, higher raw material and power costs forced the company to reduce its aluminum capacity by 1 million tons in 2008.

Moreover, the company reported a 93% fall in its net profits in the third quarter of 2008. Higher raw material and power costs along with potential overcapacity force us to rate the shares a Hold with a target price of $7.00.

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