CHALCO returns to loss in Q2 on oversupply in China

Reuters reported that Aluminum Corp of China Limited returned to a loss in the Q2 as a domestic supply glut dragged down prices for the lightweight metal.

Analysts said that China's aluminium market has returned to a state of oversupply as producers restarted idled facilities and new production exceeded demand growth.

CHALCO said that it reversed year earlier loss to post H1 net profit on higher sales volume and higher aluminium prices in the early part of this year. It forecast its earnings for the first 9 months of 2010 to remain in the black.

Analysts are expected to revise downwards their earnings estimates after the disappointing first half result. The consensus forecast is a profit of CNY 3.15 billion for 2010 from 12 analysts polled by on Thomson Reuters I/E/B/S.

Lacklustre global demand and increased exports from China pushed LME aluminium MAL3 below USD 2,000 per tonne at the end of June from a year high of USD 2,486 in April. The price stood at USD 2,051 on Monday.

Strong demand in China for the lightweight metal used in construction, transport and packaging had been the main growth driver of the global aluminium industry from 2003 to 2009 until the financial downturn dragged prices lower as demand weakened.

China became a net aluminium importer in 2009 as leading producers in the country cut production that helped support a recovery in global prices during the second half of 2009.

Chalco's operating costs remain high, above rivals UC Rusal Ltd (0486.HK: Quote), Alcoa Inc (AA.N: Quote) and Rio Tinto Plc (RIO.L: Quote) (RIO.AX: Quote), making it more vulnerable to softer aluminium prices.

(Sourced from Reuters)

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