Aluminum Corp of China (Chinalco) will stay in the black this year despite plunging prices for the metal, but Europe’s worsening debt crisis is darkening next year’s outlook, said President Xiong Weiping on Thursday.
Chinalco, the country’s biggest aluminum producer, made a profit of 3 billion Yuan ($473.2 million) in the first 11 months of this year, but profitability has been hurt since October amid a volatile global economic climate, said Xiong.
But its copper, international engineering and trade operations remain profitable, which will buoy the company’s growth, he added.
The aluminum maker moved into profit last year after reporting total losses of 140 billion Yuan in 2008 and 2009.
Domestic prices of electrolytic aluminum have cumulatively dropped more than 14 percent since August, pushing some aluminum makers into the red since October, said Wang Jianchao, an analyst at Jinrui Futures Co.
He said that if prices keep dropping in the New Year, some companies will reduce output to cut their losses as early as next month.
This year’s situation is similar to the 2008 financial crisis, Xiong said.
He said that Chinalcos diversification of its business portfolio ore milling equipment, away from one solely focused on aluminum to a comprehensive mining company with operations in copper, rare earths, iron ore and coking coal, would ward off losses this year.
The State-owned Assets Supervision and Administration Commission last year allowed Chinalco to engage in all natural resource sectors except oil and natural gas.
But Xiong warned that the global slowdown arising from the European debt crisis would last longer than the financial woes that started in the US in 2008.
We will meet much greater challenges in the first half of next year than this year, Xiong said.
He also said that Chinalco would accelerate its overseas expansion to achieve its target of having foreign assets account for 30 percent of the total by 2020, with upstream assets making up more than 50 percent.
We will invest more in resource-rich foreign countries, Xiong said.
In May, the non-ferrous metals conglomerate commenced construction on the Toromocho mine in Peru. The mine is expected to open in 2013.
The mine is expected to produce about 1 million tons of fine copper a year, which will largely ease Chinas import pressure for the metal, Xiong said.
An iron ore project in Guinea, in which Chinalco has a 47 percent stake, is expected to begin commercial production and exports to China in 2015.
Rio Tinto PLC holds the remaining 53 percent of the project.