ALUMINUM Corp of China (Chalco) expects volatile and downward pressure on domestic aluminum prices in the second half on fiercer competition and slower demand, its chairman said yesterday.
Prices may average as low as 18,000 yuan (US$2,632) a ton during the period, Xiao Yaqing said. Shanghai futures prices for the metal averaged 19,275 yuan in the first half.
An oversupply in the domestic market has forced leading players to cut production to prevent a price slump. "The weak prices and higher power tariffs may press on planned capacities from coming on stream too significantly in the second half," Xiao told a press conference on the firm's interim results.
Chalco posted a 66 percent drop in first-half earnings, blaming rising production costs and output disruption. It lost 3.73 percent to 9.81 yuan in Shanghai yesterday.
Xiao said the firm will boost expenditure control in the second half, increase the self-sufficiency ratio of raw material bauxite to 50 percent in 2009, and continue to seek projects in areas with rich and cheap energy.
Meanwhile, Xiao said Chalco's parent, Chinalco, of which he is also the head, hadn't decided whether to increase its stake in Anglo-Australian miner Rio Tinto, which it bought early this year to diversify into other metals.
Chinalco and Alcoa Inc announced in February that they had bought a 12 percent stake in London-listed Rio Tinto Plc, or 9 percent of the Rio Tinto Group, the target of a hostile takeover from rival miner BHP Billiton.
A tie-up between Rio and BHP could give them the upper hand in iron ore price negotiations with Chinese mills. Chinalco's purchase surprised the market as it was considered a move to derail BHP's takeover proposal.
Last month, Chinalco won Australian regulatory approval to increase the stake to 14.99 percent, which equates to 11 percent of Rio Tinto Group. "This provided an option for Chinalco but it doesn't mean we will soon do it," Xiao said, adding that market conditions would dictate when to raise the stake.
Xiao also said Chinalco was consolidating its copper business and may list these assets on the domestic market or overseas.