Aluminum Corp. of China
After a big drop in earnings last year, Chinese aluminum giant Chinalco is already witnessing a rebound in Chinese aluminum prices because of government stimulus measures and a recovery in demand.
In the weakened commodity markets, the Chinese have been taking advantage of depressed prices to prepare for future increased commodities demand with strategic investments around the world. A pending deal with Rio Tinto is expected to expand Chinalco’s investment in commodities, adding to the stake that it took with Alcoa in Rio Tinto last year. Read more
Aluminium industry ‘at risk’
The Australian Workers Union (AWU) warned of the potential for the local aluminium industry to be lost on 14 July 2008. The union launched a report by think tank Per Capita, claiming 15,000 jobs could be lost under the Federal Government’s carbon trading scheme, unless proper compensation is provided. According to the report, the scheme could cause polluting companies to shift their operations to countries with less environmentally sound policies. Union national secretary, Paul Howes, said such a change would result in greater overall emissions, as refinery processes undertaken in Australia require 50 per cent less emissions than those in China. A report released by the Climate Institute on 14 July suggested that the world’s most efficient aluminium smelters are in Africa
China cuts boost aluminium
Analysts have downplayed suggestions that a move by Chinese aluminium producers to reduce production could affect global supply. Selina Wu of CBI Shanghai expects the oversupply of aluminium to continue, but acknowledges that the aluminium price could rise due to speculative trading. The announcement that China’s aluminium production will be reduced by up to 10 per cent has prompted a rally in the aluminium price, which rose to a new high of $US3,317 per tonne on 11 July 2008
Aluminum sets record high, lead leaps 12 percent
Aluminum jumped to a record high on Thursday on output cuts in top producer China, while lead surged more than 12 percent as the market fretted over lower inventories. Aluminum for delivery in three months hit an all-time high of $3,380 per tonne, up 6 percent from Wednesday, after China’s top 20 smelters said they would cut output by 5-10 percent from July to reduce power consumption. The energy-intensive metal, used in transport and packaging, closed at $3,290 per tonne London Metal Exchange, up $100 from Wednesday.
The metal has gained nearly 40 percent since the start of the year on the back of power problems in China.
“We think this is just the beginning of the energy related disruptions the market is going to face,” said analyst Gayle Berry at Barclays Capital. “A power crunch is coming, more and more production losses will keep coming out of China. While more smelters have been built they’re net short of energy,” she said. Read more
Alcoa’s quarter likely to bear marks of rising costs
Bright spot: aluminum prices have been hitting new highs
Alcoa is set to usher in the second-quarter earnings season with a report marred by rising energy costs and two June incidents that curbed its aluminum production, possibly offset by recently rising aluminum prices. Analysts anticipate the Pittsburgh-based aluminum maker (AA:alcoa inc com News, chart, profile, more AA 33.39, +0.61, +1.9%) will report profits of $570 million, or 66 cents a share, for the three months ended June 30, according to FactSet Research.
Results, slated for release after the bell Tuesday, likely were dragged lower by the shuttering of an alumina plant under Alcoa’s Australian division and a 50% cut in production at the company’s Texas aluminum smelter. Both production cutbacks stemmed from disruptions in Alcoa’s power supplies.
In the year-ago quarter, the member of the Dow Jones Industrial Average ($INDU:$INDU
News, chart, profile, more posted earnings of $715 million, or 81 cents a share.
Production of aluminum also has been hampered by higher energy costs plus expenses for raw materials, including caustic soda and coke. Read more
Aluminum hits record on China’s power problems
Aluminum rose to a record in London as a power shortage forced smelters in the north of China, the world’s largest producer of the metal, to reduce output.
China’s northern provincial government of Shanxi ordered smelters to cut production to ensure power supply for farming, Wang Suomin, a manager at Shanxi Huaze Aluminum & Power Co., said Monday. Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal used in cans and cars, halted output at a venture in Shanxi with an annual capacity of 280,000 metric tons.
The cut “brought back fears that this is the start of a trend that will constrain supply in the second half,” Daniel Hynes, a metals analyst at Merrill Lynch & Co. in London, said in a phone interview. “Chalco is one of the lowest-cost producers in the country.”
The contract for delivery in three months on the London Metal Exchange climbed as much as 5.3% to $3,327 a ton, beating the May 11, 2006, record by $16. It traded at $3,300 as of 5:12 p.m. local time.
Aluminum, the most traded contract on the LME, has more than doubled in five years as rising power prices buoy production costs, squeezing profit margins at companies including Alcoa Inc., the largest U.S. producer of the metal. Energy accounts for 30% to 40% of the cost of producing the metal.
Power “is a significant issue for aluminum,” Michael Purdy, a trader at Fortis in New York, said by telephone. “You’ll see renewed interest in metals by funds as they are attracted by price movement.”
Production cuts worldwide because of energy problems probably totalled more than 900,000 tons this year, according to Barclays Capital, the equivalent of about 83% of existing stockpiles at the London exchange.
“Power-constrained supply growth combined with solid demand growth will propel aluminum prices to our one-month target of $3,500 and beyond,” said Gayle Berry, an analyst at Barclays in London.
A standard Boeing 747 jumbo jet contains about 75 tons of the metal and the structure of the space shuttle is 90% aluminum, according to the London-based International Aluminium Institute.
Smelters with a combined 700,000 tons of annual capacity may have been affected by the provincial government’s order, research company CBI China Co. said Monday. That’s almost 5% of the nation’s production. Shanxi produced 1.08 million tons of aluminum last year, according to Lehman Brothers Holdings Inc.
The power shortages in Shanxi, normally a net power exporter, may indicate wider problems in China, RBS Sempra Metals Ltd. said in a report Monday.
Stockpiles of aluminum monitored by the LME have increased 32% in the past 12 months to 1.08 million tons.
Including those monitored by exchanges in New York and Shanghai, inventories totalled 1.28 million tons, or 11.4 days of global consumption, according to Bloomberg calculations. Last year’s average was 8.9 days. Read more
