China: Hongqiao reports profits drop

China’s third largest smelter, Hongqiao, has announced a 1.1% drop in year-on-year net profits to HK$3.53 billion.

Chief executive Zhang Bo says that China’s second phase of rationalization has begun and argues that the indigenous aluminium industry is now facing stiff competition from imports, according to a report in the South China Morning Post.

While phase one of China’s aluminium rationalisation programme involved the closure of outdated capacity, the second phase, claims Zhang, will hit those facing stiffer rivalry from imports coming in from Malaysia, where a major smelter project is on the drawing board, and from UC Rusal, the Russian smelter, that is pushing hard on exporting its metal to China.

Analysts believe that imports won’t account for a major slice of supply as China is busy building additional capacity in the North West of the country in coal-rich regions like Xinjiang.

In three years, Hongqiao plans to be self-sufficient in terms of electricity and alumina. Currently it is 65% and 69% self-sufficient in electricity and alumina respectively.

By 2015, Hongqiao’s Indonesian alumina refinery will come on stream and the company plans to ‘eventually raise its self-owned power generation to 6,000MW from a current 3,390MW.