The Aluminum Corp of China Ltd, the nation's largest maker of the light metal, has cut its alumina price by 23 percent to reflect lower market prices and weak demand.

The company, commonly known as Chalco, is now offering spot alumina at 2,000 yuan (US$293) a ton, down 600 yuan, according to a company statement.

Chalco still fetches a price premium over other alumina refiners, who sell for around 1,800 yuan a ton, traders said.

The cut was on top of a 38-percent price reduction last year, during which Chalco's prices were lowered to the year-end 2,600 yuan from 4,200 yuan at the beginning of 2008. Aluminum futures tumbled 36 percent last year as demand from car makers and builders declined, forcing companies to cut output.

Chalco has reduced its annual alumina capacity by 4.11 million tons, or 38 percent of its total, since November, after reducing 720,000 tons of aluminum capacity, or 18 percent, from October. About two tons of alumina are needed to make one ton of aluminum.

"Aluminum production cuts have led to an oversupply of alumina," said Oriental Securities analyst Shi Weiping. "As long as the economy doesn't rebound, the situation will continue and alumina prices may drop further."

But another researcher at a Shanghai-based fund management company said further alumina price falls may be limited this year because prices are now close to costs.

Other analysts said more aluminum output cuts may be unlikely because of lower costs for alumina and power, and after the State Reserves Bureau's purchase of 290,000 tons of aluminum from domestic smelters.

Meanwhile, China's top nickel producer, Jinchuan Group, said it expects to expand output by nearly 20 percent to 125,000 tons this year as it seeks to lower average operating costs and expand its scale amid a slowing economy. It has also raised prices for refined nickel by 6 percent.

Aluminum futures closed up 4.5 percent yesterday in Shanghai, while copper and zinc jumped the daily limit of 6 percent, chasing sharp gains on the London Metal Exchange on Friday. Nickel, which is not traded in Shanghai, was down almost 5 percent yesterday in London after Jinchuan's news.

(Shanghai Daily January 6, 2009)