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Last updated at: (Beijing Time) Saturday, April 05, 2003

China Aluminium Group to be Inaugurated

China Aluminium Group will be launched late this month, marking the start of a massive consolidation of the Chinese aluminium industry.


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China Aluminium Group will be launched late this month, marking the start of a massive consolidation of the Chinese aluminium industry.

Sources from Aluminium Corporation of China (Chinalco), the flagship of the group, said more than 60 Chinese aluminium companies have applied to join the group, with a combined primary aluminium production capacity accounting for over 70 percent of the national total and alumina capacity almost 100 percent of the national total.

China Aluminium Group will enjoy the status of a legal entity, including Chinalco as a core enterprise, close members, semi-closemembers and loose members, said the sources.

The new conglomerate will be among the State Council approved list of some 120 large group companies which the central government will help to become internationally competitive.

Guo Shengkun, Chinalco president, believed consolidation was badly needed in the Chinese aluminium industry to enhance the industry's competitiveness and its ability to deal with market risks.

China has become the world's largest primary aluminium producerand a net exporter of aluminium, with its aluminium capacity doubling in the past three years to 5.2 million tons a year. It produced 4.3 million tons of aluminium last year.

The country's aluminium industry has been plagued by a number of problems, including scattered distribution of smelters with limited production capacities.

There are 130 aluminium smelters, more than the total number ofsmelters in the rest of the world. But, the average production inChina is about 30,000 tons per smelter, compared with the average of 190,000 tons outside China.

On the other hand, China's aluminium industry relies heavily onthe international market: much of its aluminium production needs to be exported and about a half of its demand for alumina, the main material for aluminium production, has to be imported.

About half of the global aluminium production and 80 percent ofalumina supply have been controlled by the six largest Western aluminium companies.

Taking advantage of the rush by Chinese aluminium smelters to import alumina and export aluminium, Western traders press down China's aluminium export price and lift alumina import prices. Inthe past four months, the alumina price has more than doubled from140 US dollars per ton to 300 US dollars per ton, which has causedan abrupt rise in aluminium production costs.

The establishment of a new conglomerate will help its members reduce market risks and lift the international competitiveness of the whole Chinese aluminium industry by strengthening coordinationin exports and imports, pricing, new investment projects, and transfer of technologies, said Guo.


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