Aluminium Corp of China Ltd (Chalco), the world's second-largest alumina producer, has agreed to buy Fushun Aluminium Co for 500 million yuan (US$62.1 million) to expand output capacity.

 

Chalco, the country's largest aluminium producer, said in a statement on Sunday that it had signed an agreement to acquire 100 percent of Fushun Aluminium, which produces primary aluminium and carbon products.

 

The Fushun Aluminium plant had a smelting capacity of 140,000 metric tons last year and net assets of 503 million yuan (US$62.4 million) at the end of February.

 

Chalco's shares rose 5.1 percent to HK$8.20 (US$1.02) on the Hong Kong Stock Exchange yesterday.

 

"Chalco's purchase was to boost its production capacity," said Zhang Lei, a researcher with China Merchants Securities.

 

Zhang said the company is trying to become a more integrated player through capacity expansion and domestic acquisitions.

 

Last December, Chalco set up a primary aluminium joint venture with a total investment of 2.4 billion yuan (US$293 million) in North China's Shanxi Province.

 

The company not only expanded its aluminium business, but has also developed other nonferrous metals businesses.

 

Chalco spent 540 million yuan (US$67 million) buying Shanghai Nonferrous Metals.

 

The company said it would create a new company in Shanghai following the formal acquisition, in order to boost aluminium and other nonferrous metals production.

 

The company has also started its overseas expansion.

 

It is poised to make China's single largest investment in Australia as it seeks to ease shortages of raw materials.

 

The company will submit a final bid by May to build a A$2.9-billion (US$2.2 billion) bauxite mine and refinery in Queensland, its top executive said. The deposit has enough resources to produce aluminium for 2.5 million Boeing Co 747-400 aircraft.

 

Prices of imported spot alumina in China, the world's largest importer, rose nearly 30 percent in 2005.

 

Last year, the price of spot alumina offered by Chalco increased 20 percent as the country's growing aluminium output fed demand for alumina, the metal's raw material.

 

Many smelters in China have been operating at a loss due to the rising price of alumina and because of the country's measures to cool investment in the energy-intensive aluminium industry.

 

As many as 40 small aluminium smelters were shut down last year across the nation due to heavy losses, statistics from the country's nonferrous metals association revealed.

 

To address the losses, China's 23 major aluminium smelters, representing more than 60 percent of the country's output, announced they would cut production by 10 percent.

 

(China Daily March 14, 2006)