China Aluminum's slimming reduction lead butterfly effect

Since May, Chinalco has undoubtedly become an eye-catching focus in the aluminum industry. From the beginning of the broken arm to survive, super 8 billion assets were packaged and sold, and the shares or related assets of several aluminum processing enterprises such as its Henan Aluminum Co., Ltd. were sold off, and the 380,000 tons of electrolytic aluminum production capacity that had caused great concern in the market was currently shut down. The side reflects the deterioration of the aluminum industry in the market today. Even industry giants such as Chinalco are hard to avoid. This company, which has turned from lossless to profitable for three consecutive years, has to dump assets to save itself, eliminate losses and solve cash flow problems. Tight problem.

On May 10, China Aluminum announced that it intends to publicly transfer the equity of eight companies engaged in aluminum processing business through the Beijing Property Rights Exchange.

On May 17, China Aluminum once again announced that it intends to transfer a total of 1.75 billion yuan in credits to Chinalco Henan Aluminum Co., Ltd. and Chinalco Qingdao Light Metal Co., Ltd.

On June 5, the Aluminum Corporation of China announced that according to the current market conditions, in light of the principle of maximizing profits, the company’s partial electrolytic aluminum production line will undergo flexible production from now on, involving temporarily shutting down electrolytic aluminum production capacity of approximately 380,000 tons.

Recently, China Aluminum announced that it intends to sell the assets of the company's Northwest Aluminum Processing Company to the Northwest Aluminum Processing Plant, a subsidiary of Chinalco, for a total consideration of 1.66 billion yuan***. At the same time, the company plans to sell the alumina assets of the company’s Guizhou branch company to Guizhou Aluminum, a subsidiary of Chinalco, for a total consideration of 4.429 billion yuan.

At present, the aluminum product market continues to be weak and there is a serious overcapacity. According to Chinalco's 2012 annual report, China Aluminum lost 8.23 ​​billion yuan in losses last year. Among the business segments, the alumina and primary aluminum business suffered losses of 3.745 billion yuan and 3.085 billion yuan respectively. The aluminum processing sector has a smaller business volume and the loss is 13.86 billion yuan, and these three businesses were profitable in 2011. In the first quarter of this year, the loss of China Aluminum has reached 1 billion yuan.

This is not the case for China Aluminum. Since the fourth quarter of 2011, aluminum prices have continued to decline, and the problem of overcapacity in the electrolytic aluminum industry has not been completely eradicated. Although international aluminum prices have been declining in recent years, The electricity price, which accounts for 5% of the production cost, has continued to rise. The excess production capacity has caused vicious competition and the overall loss of the industry. Coupled with domestic and foreign economic recovery is still weak and other effects, the domestic electrolytic aluminum companies have suffered large losses. According to the National Bureau of Statistics, as of the end of March, there were 278 aluminum smelting enterprises above designated size and 97 loss-making enterprises, accounting for 34.9% of the total.

Up to now, besides China Aluminum, Yunnan Aluminum's plan to reduce production by 150,000 tons has also been implemented. At the same time, Xinheng and Zhongfu two large aluminum companies also plan to reduce production by 120,000 tons and cut production by 50,000 tons respectively. As early as in April-February this year, domestic aluminum enterprises have also reduced output by nearly 1 million tons.

At present, the electrolytic aluminum industry is still facing a serious overcapacity situation. The data from the International Aluminum Association shows that although there are more than 2 million tons of high-cost production capacity shut down in the world in January-April, but this part of the production capacity The drop did not affect global electrolytic aluminum production. From January to April 2013, the world aluminum production reached 15.3 million tons, an increase of 4.5% year-on-year. Previously, data from the National Bureau of Statistics also showed that the total domestic electrolytic aluminum production in the first quarter of 2013 was 5.215 million tons, which represented a year-on-year increase of 9.62% compared to the output of 4.785 million tons in the same period of 2012, and the actual operating capacity increased by 1.853 million tons from the same period of last year. Because of this, many industry players are not optimistic about their performance prospects.

How to restrain the price of bauxite ore and effectively control the cost of alumina, as well as to solve the constraints of the domestic electric power system on integration of coal, electricity, and aluminum, will also be the key to considering the “quality” of its transformation strategy.