Chalco Ups Spot Alumina Price 10.5% To CNY4,200/Ton

HONG KONG (Dow Jones)- Aluminum Corp. of China Ltd. (ACH) Tuesday raised the price of spot alumina for the second time in three weeks to reflect tightening supply.

The Beijing-based company, better known as Chalco, is selling its spot alumina at CNY4,200 per metric ton, up 10.5% from CNY3,800/ton. The hike takes effect immediately.

"The price hike is a positive surprise to the market," said Duncan Chan, an analyst at China Construction Bank International Securities Ltd. "Although the price rise will not have a significant impact on Chalco’s 2007 earnings, the move signals the market’s outlook is improving."

Chan expects the price hike will boost Chalco’s 2007 net profit by 1% to 2% as only one third of the company’s alumina is produced for external sales.

Shares of Chalco fell 2.2% to HK$15.28 in the morning session, despite the price hike. The fall in share price was in line with other metal stocks as investors are concerned Beijing’s tightening measures may have a negative impact on metal demand.

Chalco last raised its alumina spot price on Nov. 27 by 8.5% to CNY3,800/ton after non-Chalco refineries increased their prices.

Alumina, made from the bauxite, is used to produce aluminum.

Chalco, China’s biggest alumina and aluminum producer, said in a statement that international and domestic alumina markets currently see very tight supply.

China International Capital Corp. earlier said in a research note it expects spot alumina price will gradually climb in 2008 due to rising raw material costs, including bauxite prices, energy prices and shipping freight rates.

CICC forecasts domestic alumina refineries will adjust up their alumina prices in order to offset rising costs.

China’s aluminum production rose 50% on year in the January to October period to 16.12 million tons, according to the National Bureau of Statistics.