Chalco sees China H2 alumina output growth falling

HONG KONG, Aug 22 - Aluminum Corp of China Ltd, the world's third-largest producer of alumina, expects output growth of the material in the country to fall in the second half of the year from the first half. The firm, also known as Chalco , has no plans to buy copper assets from its parent, which controls a mining project in Peru and will buy a 49 percent stake in Yunnan Copper, the third-largest copper group in China, Chalco Chairman Xiao Yaqing said on Wednesday. Chalco would continue to acquire aluminium smelters in China after its planned takeovers of Baotou Aluminum and Liancheng Aluminium. "China's alumina output growth in the second half will certainly be much lower than the first half," Xiao told reporters at a news conference in Hong Kong. China's production of alumina, the main material for aluminium production, rose 58.1 percent from a year earlier to 9.5 million tonnes in the first half on expanded capacity. Xiao said the bulk of expanded alumina output in China relied on imported bauxite, the ore used for alumina production, and such demand was not fully covered by stable overseas supply. "It will have some supply problems," he said. He added costs of bauxite imports also had risen partly due to high freight charges. Xiao said he saw Chinese alumina prices hovering between 3,500 to 4,000 yuan per tonne in the second half of the year, against Chalco's spot price of 3,900 yuan since March. He expected prices of primary aluminium to range between 19,000 and 22,000 yuan per tonne in the second half on strong domestic demand. Spot aluminium was trading at about 19,500 yuan per tonne on Wednesday. Consumption of primary aluminium in China, the world's top user of the metal, surged 40 percent from a year earlier to 5.6 million tonnes in the first half. Demand for primary aluminium would stay strong in the second half despite a statement by China on Tuesday that it would raise interest rates. "It should not have an impact. I am very optimistic," Xiao told Reuters at the sidelines of the news conference. In 2007, Chalco expects to produce 10.2 million tonnes of alumina and more than 3 million tonnes of primary aluminium, 11 percent more than its previous forecast of 2.7 million tonnes. "Our aluminium production (will) be higher than expected ... due to output from acquired smelters," Xiao said. Xiao said Chalco was in talks with some smelters and that could lead the firm to buy stakes in some of the smelters in China. He did not give names. But Chalco was not eyeing on its parent's copper assets and would continue to focus on aluminium assets, he said. The parent, Chinalco, is likely to pay 7 to 8 billion yuan to buy a 49 percent stake in the parent of Yunnan Copper , a senior executive at the target smelter said on Tuesday. Xiao said Chinalco would aggressively expand its copper business. Overseas, Xiao said Chalco would soon receive the right to develop a project in Queensland, Australia, which would have a capacity of 2.1 million tonnes of alumina a year. But Chalco and its counterpart had not finalised details of a project in Vietnam and the startup of the alumina project would be later than expected, Xiao said. ($1=7.6005 yuan)