china to buy 5.2% more alumina

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    Thursday, October 13, 2005

    METALS
    Minmetals plans imports boost
    Alumina buying to rise 5.2pc this year as production fails to keep up with demand

    FOSTER WONG


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    Minmetals Resources, the Hong Kong-listed unit of China's largest metals trading group, plans to boost its alumina imports by 5.26 per cent this year as domestic production still falls short of surging demand.

    The red chip, China's biggest alumina and aluminium importer, said it planned to import about two million tonnes of alumina this year, or about 30 per cent of the mainland's total buying, versus 1.9 million tonnes last year.

    "China's domestic alumina production is at about eight million tonnes this year but demand is expected to be double that. So there is still a big shortfall of alumina supply in the Chinese market which can only be filled by imports," executive director and deputy general manager Wang Lixin said.

    At present, the mainland imports alumina at an average of US$530 to US$540 per tonne, according to Mr Wang. In July, shareholders of Minmetals, formerly Oriental Metals (Holdings), approved the purchase of the alumina and aluminium-related business of its state-owned parent, China Minmetals Corp, for $2.88 billion.

    As part of the deal, Minmetals also bought China Minmetals' 30-year alumina supply agreement with Alcoa, the world's leading producer of alumina. Minmetals will receive 400,000 tonnes of alumina per year until 2027.

    Driven by the growth of its construction, transport and home appliances industries, China has been the fastest-growing aluminium consumer for the past five years, with the industry expanding at a compound growth rate of 15.3 per cent per annum.

    Demand for alumina, a key ingredient in the production of aluminium, reached 13.07 million tonnes last year in China. However, domestic production was only at 7.04 million tonnes.

    As a result, more than 45 per cent of China's alumina was imported last year, according to state-backed Beijing Antaike Information Development.

    The outlook for China's aluminium exports this year would be a different story due to measures by Beijing to curb over-investment, Mr Wang said.

    "We believe next year, especially the second half of next year, metal exports from China will be reduced dramatically," he said.

    Minmetals president Xu Huizhong said the company planned to expand its upstream and downstream alumina- and aluminium-related businesses in the future but declined to give further details.

    According to the terms of an earlier acquisition, Minmetals was given an option to buy a 51 per cent stake in US refiner Sherwin Alumina and a 33 per cent stake in Guangxi Huayin Aluminium from its parent within the next three years.

    The price of Minmetals shares dived 4.76 per cent to close at $2 yesterday.
 
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