Chinalco official predicts higher alumina price

The Aluminium Corporation of China (Chinalco), the world's second largest alumina maker, predicts that alumina prices will increase in the long run and plans to enhance capacity to 12 million tons by 2008, a company official said.

Li Dongguang, the general manager of Chinalco's sales and trade department, said that although the alumina price has the potential for further falls short term, it is just an ordinary price fluctuation and the overall market trend in the long run will be rising.

"This is because China's demand is increasing at the same pace and currently China is still a net importer of alumina," he said.

In the next few years, Chinalco's oversea development strategy will focus on looking for bauxite resources, he said.

The spot alumina price has fallen to $250 per ton from $480 per ton in May. However, Li thinks the price is still at high level compared with the historic low at $140 per ton in 2002 and there is space for further falls in the near future.

However, he said that the falling alumina price would not negatively impact Chinalco's profitability because the company would continue to take over aluminium smelters, which would effectively consume its new alumina capacity.

Chinalco has taken over nine smelters since 2005, adding to its aluminium capacity by 3.2 million tons.

It plans to increase the aluminium capacity to 5 million tons by 2010 mainly by acquisitions, said Liu.

Besides alumina and aluminium smelting, aluminium processing is also one of Chinalco's most important profit centers. It can make 820,000 tons of aluminium products per year.

Chinalco plans to increase the processing capacity to 1.8 million tons by 2010, of which 800,000 tons will be from the Southwest Aluminium subsidiary, 500,000 tons from the Henan branch, 300,000 tons from the Fujian Ruimin subsidiary, and 200,000 tons to 300,000 tons from the Northeast Aluminium subsidiary, said Liu.

Chinalco, as China's largest nonferrous metals conglomerate, also plans to increase its presence in copper and other metals sectors including titanium, molybdenum, and rare earths in the next few years. It eyes a 900,000-ton copper capacity by 2010, 700,000 tons higher than its current capacity, and a 500,000-ton copper product processing capacity, 320,000 tons more than at present, he said.

With a wide range of capacity rises, Chinalco predicts a doubling of sales revenue to RMB 120 billion ($15.19 billion) and total assets of RMB 200 billion ($25.32 billion) in 2010.