Posts Tagged ‘aluminium’

Bullish future for Chalco

chalcoA number of new reports coming out of China & other industry & economic factors point to the Aluminum Corporation of China Limited (CHALCO) entering into a new growth phase, which has me looking at the ADR from a fairly bullish stance.

Chalco (NYSE:ACH), which is by far the largest domestic producer of finished aluminium & holds a national monopoly on alumina. It runs a national network of 34 subsidiary operations & has a 26.6% stake in Yunnan Copper, the second largest copper producer in China.

Abroad, Chalco has been very active on the acquisition front, in 2007, it acquired development rights in the Aurukun project in Australia, which will be coming online in 2011, which is slated to provide 6.4 mtpa of bauxite & 2.1 mtpa of refined alumina. 2008 saw it acquiring the Peru Copper Company for a snip at $860 million & along with it the development rights for Toromocho which is estimated to hold more than 15 billion tonnes of high grade ore.

Not all has been complete plain sailing, however,  as the company bought into 12% of Australia’s Rio Tinto last year in partnership with Alcoa. But failed this year to acquire a further 18% for a chunky $20Bn after a shareholder revolt & Australian fears that Chinese companies were getting their hands on mineral assets at knock down prices.

To cap off the supply side, as we reported yesterday, it looks as though China has managed to secure access to vast bauxite resources in Guinea, the majority of which will go to supply Chalco refining & smelting operations.

Looking at the Chinese economy as a whole & at one or two of the sectors in more detail, I can see a building demand for aluminium starting in the short term.

China National News has reported trade figures for September that show a marked slowdown in exports, down only by 15.2% from September 2008. Considering that overall, Chinese exports have been on a decrease of around 31% for the year, this is a strong signal that Chinese manufacturing is back on the rise.

Figures released by the China Association of Automobile Manufacturers today, show that the auto sector is still enjoying sustained growth, with more than 1.3 million units being sold in February, as 78% increase on a year ago. So far 9.66 million units have been sold in China in 2009, a jump of 34% on the same period in 2008. With this continued growth in the sector, aluminium demand will also continue to grow in line.

In aviation, China has made some great advances in the last 10 years, moving from maintenance & repair, to engine manufacture & now construction of airliners. We have seen Airbus centre it’s Asian operations for A320 assembly in Tianjin, alongside Eurocopter, whilst Beijing is investing over 10 billion yuan in an “aviation city” that will support aircraft manufacturers. Domestic useage of commercial aircraft has seen astonishing growth this  year, with a 43% rise in passenger air traffic being registered. Now China is looking to build it’s own flagship airline brand to take on incumbents Boeing & Airbus. State-owned Aviation Industry Corp. of China, (Avic) which is producing the ARJ21, recently predicted the country will need 3,796 new passenger planes by 2028 to keep up with domestic demand for air travel, adding to its present fleet of 1,191.

Need I say more ?

Courtesy of Peter Medved at MyStockVoice

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China stocks up on energy & raw materials while prices are depressed

001320d123b90949ce3308 China has embarked on an ambitious spending spree in order to help stave off recessionary pressures & attempt to maintain a growth target of  8% in 2009. Following on from its massive $585M stimulus package, announced in early November, news of deals in energy & metals has been flowing over the last week. When the stimulus package was originally announced, we heard this from our friends at RBS :

“Whats important here is just how quickly that money hits the street,” said Ben Simfendorfer, chief China economist for Royal Bank of Scotland, speaking on CNBC

Well it would seem not to have taken too long, as we have news that apart from pulling forward the long anticipated 3G rollout, as reported on MyStockVoice in an earlier post, China is beginning to stockpile oil & gas via imports whilst building an inventory of  aluminium & other metals from domestic producers.

Zhang Guobao, the head of the National Energy Administration, said in remarks published on Monday that China would actively push forward the construction of the second phase of state strategic oil reserves after having largely completed the first phase. China has completed the planning of the second phase of government storage facilities that would be able to hold up to 26.8 million cubic metres of oil, or some 170 million barrels, but has not disclosed whether construction has begun. Nor has the government disclosed if the tank farms set up in four locations in the first phase, with total capacity of some 102 million barrels, have been fully filled.

The world’s second-largest oil user will also take advantage of opportunities resulting from the financial crisis and weak energy market to expand energy cooperation with neighboring countries and major energy producers, Zhang said.

State controlled Sinopec (NYSE – SNP) recently completed the construction of oil storage tanks with a capacity of 3.8 million cubic metres in the coastal province of Zhejiang & has also announced a mutual supply agreement with fellow oil giant CNPC  . Similarly, rival PetroChina (NYSE – PTR) has begun to fill a new facility of 1 million cubic metres in the northwestern Xinjiang region in partnership with Kazakhstani oil firm KazMunay. Zhang also confirmed that China will push forward the construction of the proposed China-Myanmar oil and gas pipelines while also proceeding with the China-Central Asia gas pipes and the second phase of the China-Kazakh oil lines.

Meanwhile, counterparts at the State Reserve Bureau (SRB), have announced that will buy 300,000 tons of aluminum at 12,300 yuan (about $1,750) per ton in January 2009 to push up prices and support producers, as reported by Rednet. China’s aluminium producers, like their competitors worldwide and their peers in other base metals, have been forced to shut down some production to cope with the impact of the global economic crisis, which has crippled demand. 

“Aluminium prices were encouraged on the reserve purchase news,” said analyst Jia Zheng at Southwest Futures. “The decided purchase volume seems to be lower than expected but we are looking forward to more movement by the reserve bureau.”


Chinese officials have said they plan to buy up resources and materials to support producers, who are smarting from prices that have fallen below the cost of production, rumours abound that this buy up on aluminium could reach a total of 1 million tons by April 2009. The major recipient for this windfall will be state controlled Chinalco subsidiary Chalco (NYSE – ACH), who is reported to be receiving 50% of the order, whilst the remainder will be shared by seven regional producers.

 On the same day as the SRB announced the procurement plan, Bao Steel Group, China’s top steel maker, raised its February steel prices by 100 yuan/ton to 300 yuan/ton, this is widely believed to be in response to a previous SRB announcement that  another 3 trillion yuan ($400M)would be set aside for railway infrastructure construction projects and post-quake reconstruction efforts, the investments are expected to increase steel demand by 200 million tons in 2009. This could also be potential good news for other steel majors, particularly Mittal Steel (NYSE – MT), which acquired a 37% stake in government owned  Hunan Valin, Mittal  already has a $100 million steel plant under construction in the northeast China port city of Yingkou, Liaoning province.

Update 1 (30/12/08) : Myanmar signs gas deal with SKorea, India, China as reported in The Times of India

Military-run Myanmar has signed a deal with South Korean and Indian companies to pipe natural gas from the energy-rich nation’s offshore fields to China, state media reported Monday.

“The agreement was signed to export natural gas to China from Shwe natural gas project at Block A-1 and A-3 at Rakhine coastal region through pipelines,” the New Light of Myanmar newspaper said. The paper gave no other details of the project, but Beijing media reported last month that China was planning to start construction on a gas pipeline to Myanmar in early 2009.


Emirates & India pair up on Indonesian aluminium venture

nalcoIndia’s largest aluminum maker, state owned National Aluminum Company  (NALCO), and United Arab Emirates government-linked RAK Minerals and Metals Investment (RMMI) plan to invest $4 billion  to build a smelter and supporting infrastructure, including a power plant, in Tanjung Api-api, South Sumatra, Indonesia. $2.5 billion  of the planned investment will be spent on the smelter and the remaining $1.5 billion on a power plant, a port and railway. The smelter is designed to process 1 million tons of alumina a year and is expected to produce 0.5 million tons of aluminum annually. The alumina will be imported from India, which produces about 2.1 million tons of alumina per year. The proposed dealwill see RMMI taking a 24% stake in the Sumatran based project signed by NALCO & the Indonesian province last December.

RMMI signed a seperate infrastructure investment deal in February with the South Sumatran Government. This involves the Emirates firm investing into the Tanjung Api-Api industrial city project, which encompasses a new seaport, railway infrastructure & industrial complexes for the exploitation of coal, rubber & palm oil resources. In return for the investment, RMMI will receive fast track approvals for land acquisition & associated planning developments, additionally, the MOU commits the Sumatran Government to facilitating the acquisition of mineral off take agreements, as South Sumatra is the largest coal producing area in Indonesia, this is a very attractive deal for RMMI.

Madhu Koneru, Managing Director, RMMI, said: ‘This is one of the most exciting turnkey projects that RAKIA is undertaking and we believe that it has the potential to become a catalyst for our future organic growth in Asia. We are getting extra ordinary support and encouragement from Governmental authorities and leaders of Republic of Indonesia, including the citizens and regional administration of Banyu Asia regency and South Sumatra Province, which can help RAKIA and RMMI to implement this project within record time.’

Nalco, India’s key aluminium producer and a public listed company (BOMBAY – NALU)  –  in which the Government of India holds majority stake, has  25 years of experience in mining bauxite, alumina refining, power generation and aluminium smelting. The company operates an opencast bauxite mine of 4.8 million mtpa, which serves the alumina refinery at Damanjodi. The capacity of the mine will go up to 6.3 million mtpa by middle of next year under an expansion project that is currently in progress. The excess capacity of alumina refining, will be used to feed the new project in Sumatra.


“The smelter requires a lot of electricity and we have a lot of energy in India…but still we find that it make senses to put the power plant near coal mining here in Indonesia,” B.L. Bagra, NALCO’s director, told reporters. He said the power plant will help to keep the cost of production from the aluminium smelter competitive.