Chalco’s Alumina Price Cut May Squeeze Earnings, BOCOM Says

 

 

The nation’s biggest producer of aluminum, also known as Chalco, set its alumina price at 2,800 yuan per metric ton, according to a statement posted on the company’s website. That’s the first adjustment since March when the company raised prices to 3,000 yuan, and the first price cut since July last year, according to data compiled by Bloomberg.

 

 

“The price cut would squeeze profits as the company’s margin is already thin,” BOCOM analyst Luo Rongjin said today in an e-mail. The cut was made on Nov. 28, he said. Shen Hui, a spokeswoman for Chalco, did not answer calls to her mobile phone.

 

 

Alumina, a white powder used to make aluminum, accounted for more than 70 percent of Chalco’s profit last year as the smelter struggled to break even in the metal unit, Luo said. Aluminum prices in London have slumped 25 percent from a record in May to $2,088 a ton as of 4:54 p.m. Shanghai time today amid concerns that the European sovereign-debt crisis and a slowdown in the U.S. economy may curb demand for commodities.

 

 

BOCOM’s Luo cut his estimate for Chalco earnings this calendar year to about 0.07 yuan per share from 0.08 yuan following the alumina price cut, he said. Earnings per share may be 0.091 yuan according to the median of 13 analyst estimates compiled by Bloomberg. The company posted earnings of 778 million yuan, or 0.06 yuan a share, for 2010.