Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Aluminium Corporation of China (Chalco) states its business could be materially and adversely affected due to the global COVID-19 pandemic. The social distancing measures adopted by various countries, Chalco is likely to face disruptions in normal operations, sales, project constructions among other challenges, as per the company’s annual report. 


Chalco states market prices of primary aluminium and alumina have been volatile on the back of COVID-19 outbreak in Q1 2020 (Jan-March). Spot alumina price on fob Australia basis in the quarter reached a low of $252/mt and a high of $304/mt in the quarter. Primary aluminium cash price on LME reached a high of $1,811/mt and a low of $1,489/mt in the period. In China domestic market, the spot price of alumina reached a high of CNY2,581/mt and bottomed out at CNY2,344/mt and the spot price of primary aluminium reached a high of CNY14,700/mt and a low of CNY11,310/mt on SHFE. Price volatility is likely to impact Chalco’s financial performance in the year 2020. Chalco also sells a portion of its primary aluminium products on the SHFE through futures contracts. 


Capital expenditure

The aluminium producer plans to invest CNY13.9bn for infrastructure and technology upgrades in 2020. In 2019, it invested around CNY13,025.5mn for construction and project upgradations which includes the Guangxi Huasheng New Material alumina project with 2,000,000mt processing capacity. The project is expected to be completed and commence operations by June 2020. The company also incurred capital expenditure for 432,000mt light alloy project in Shanxi Zhongrun. Total capex increased by 42.7pc in 2019. 


Production and financials

Production in 1000mt20182019% Change

Primary aluminium 

(ingots, molten aluminium

and aluminium alloys)

Operating profit before tax CNY2,264,5142,113,801-6.66


Exports hit

Chalco’s entire primary aluminium revenue was derived from domestic sales in 2019. Overseas trade was hampered with countries, mainly the US levying anti-dumping, countervailing subsidies and other duties on China. The US-China trade war too has been playing a role in declining exports for a couple of years. The two countries called a truce with a trade agreement, the phase one talks of which concluded in January. After the COVID-19 outbreak, however, the future of the agreement is uncertain. 


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