The Aluminum Corp of China Ltd. (Chalco) reported results for the first half of the year on Wednesday. The firm’s bottom line suffered from a weak domestic market for aluminium in the first six months.
The year’s first half saw Chalco smelt 1.89 million metric tons of primary aluminium, which was a drop of over 8 percent on the year from last year’s first-half total of 2.06 million metric tons. Chalco’s reduction in output was largely due to a fall in aluminium prices.
However, the decline in production notwithstanding, Chalco’s output remains ahead of third-place Rusal, who smelted 1.87 million metric tons in the year’s opening half. China Hongqiao Group remains alone in first place with a first-half aluminium-smelting total of 2.86 million metric tons.
Chalco reported an average sale price of US$1,942.53 per metric ton in the first half, off by 1.4 percent on the year. Net profit in the first half totaled CNY705.8 million, down 14 percent on the year and also a casualty of lower aluminium prices. Revenue rose in the half however, to CNY94.9 billion, up by 15 percent on the year.
The firm reported a spike in operating costs of 17 percent, totaling CNY88.5 billion in the first half. Chalco says the increase in coal freight costs from overseas suppliers was the main culprit.
“Due to the trade friction between China and the United States, global economic growth slowed down, the manufacturing industry was depressed and the consumption market was sluggish,” the firm explained in a filing to the Shanghai Stock Exchange this week.
Aluminium prices on the Shanghai market hovered near two-year nadirs in the first half, leading smelters across the country to cut capacity. Chalco shuttered 200 thousand metric tons per annum of smelting capacity in Shandong as the year began and announced plans to relocate 190 thousand metric tons per annum of capacity from Shanxi to Yunnan.
Prices have risen since then, currently coming to rest in the neighborhood of CNY14,300 per metric ton, partly thanks to shut-downs due to flooding at Hongqiao’s facilities and a separate shut-down in Xinjiang.