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October 1, 2009

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Chalco raises alumina prices as demand recovers

ALUMINUM Corp of China Ltd, the world's third-largest alumina producer, yesterday raised its spot prices by 3.9 percent, the third hike in two months amid recovering demand.

Prices for the material used to make aluminum rose to 2,650 yuan (US$388) a ton from 2,550 yuan, the Beijing-based company, commonly known as Chalco, said on its Website. It increased prices by 6.3 percent on September 1 and 4.3 percent on August 3.

"The alumina price hike reflects increased downstream aluminum production," Goldman Sachs analyst Shen Song wrote in a note. "We believe increased aluminum production is driven by better downstream demand."

Shen said the domestic aluminum price has risen by 36 percent from a low at the beginning of the year and has hovered at about 15,000 yuan a ton since early August, indicating strong demand from property construction.

United States industry leader Alcoa Inc in early September raised its outlook for China's aluminum demand this year to 4 percent growth from zero. It cited economic stimulus spending, which has spurred demand for vehicles and housing.

Zhao Lu, an analyst at the Distribution Productivity Promotion Center of China Commerce, said inventories remain high, causing other aluminum smelters to maintain idled capacity. Higher alumina prices, he said, will increase the competitive advantage of Chalco.

Chalco reported a loss of 2 billion yuan in the alumina division in the first half.


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