SHANGHAI (Interfax-China) -- The Aluminum Corp. of China (Chalco) [HKE:2600] raised alumina prices by 50% today to RMB 3,600 ($462) from RMB 2,400 ($308) a tonne, a company official told Interfax.
Further queries as to why such a sudden and drastic price hike was implemented, received no response from the company.
Guo Jianjin, an analyst with Shenzhen North Investment Co. Ltd.(Norinco), said Chalco increased the price as increasing demand from downstream industries was placing pressure on the country's rapidly rising alumina spot price, thus, Chalco stepped up prices to cash in on the situation.
The spot price of alumina in the domestic market is currently RMB 3,800 ($489.60), up nearly 81% from a low of RMB 2,100 ($270.57) in November.
Increasing production by aluminum companies has fueled the rapid consumption of alumina since September, as alumina prices declined dramatically due to increasing alumina supplies from other domestic alumina producers.
China's aluminum production is expected to increase 2 million tonnes this year, which will significantly drive up alumina consumption, Guo said.
Guo said Chalco would further increase alumina prices to as much as RMB 4,500 ($579.78) a tonne during the first quarter, as aluminum production continues to climb.
However, he warned alumina prices could fall in the second half as many alumina projects come on stream.
Heng Kun, a senior analyst with Everbright Securities in Shanghai, anticipated alumina producers, except Chalco, would offer nearly 18 million tonnes of capacity.
Roughly 40% of Chalco's alumina supply is based on the cash price of RMB 3,600 ($463.83) a tonne, while the remaining 60% of alumina supply from the company is actually fixed at long-term contracts with th price at 17% of average monthly aluminum futures price on the Shanghai Futures Exchange.
Chalco's stock price rose 1.29% to HKD 7.05 in Hong Kong in early morning trading today.
Shanghai Futures Exchange aluminum futures settled higher at RMB 19,500 today. Analysts believe aluminum prices might fluctuate within a limited range and will not fall heavily considering the low stockpiles.
London Metals Exchange's three month aluminum price closed at $2,730 a tonne yesterday, up $35 from the previous day.
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