ALUMINUM Corp of China Ltd, the country's largest producer, slumped to the lowest in three weeks yesterday after saying third-quarter profit will plunge by more than half because of higher costs and lower demand and product prices.

 

The Beijing-based company, also known as Chalco, fell 3.4 percent to close at 8.32 yuan, the lowest since September 18, in Shanghai. Its Hong Kong shares didn't trade yesterday because of a public holiday.

 

Slower economic growth and the global credit crisis are undermining demand for property and automobiles, which require aluminum. China's largest makers of the metal agreed to slash output more than a 10th from August because of power shortages.

 

"Chalco's profit may decline as the weakness in the property and automobile industries stays in place," said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co, which oversees nearly US$285 million.

 

Costs increase

 

Aluminum, copper and zinc futures fell in Shanghai yesterday, extending losses on Monday as the nation's financial markets reopened after a week-long holiday, Bloomberg News said.

 

"Price hikes of raw materials and fuel including energy increased our production cost," Chalco said late on Monday in a filing to Hong Kong's stock exchange. Financial turmoil and the global economic slump "brought about significant price falls of our products," it said.

 

Chalco's profit for the third quarter of 2007 was 2.04 billion yuan (US$298 million), according to Chinese accounting standards. Chairman Xiao Yaqing warned on September 2 that full-year costs will exceed last year's profit of 10.2 billion yuan after they surged in the first half. China, fighting a sixth year of power shortages, raised electricity charges in the second half. Energy coal prices jumped 41 percent in the first half from a year ago after the government closed small mines and demand from utilities increased.

 

Sales, prices fall

 

Passenger car sales in China fell 6.2 percent in August, the first drop in more than three years. House prices in China's 70 major cities shed 0.1 percent in August from July. Morgan Stanley has warned the real estate market could face a "meltdown. "The company also on Monday reduced spot alumina prices for the third time in five months because of falling demand. The charge was lowered 9.4 percent to 2,900 yuan a metric ton, effective October 1, according to a Website statement. Alumina is used to make aluminum.

 

Chalco has slumped 52 percent in the past three months in Hong Kong trading as aluminum on the London Metal Exchange fell 31 percent.

 

In comparison, the benchmark Hang Seng Index of Hong Kong stocks lost 23 percent.

 

Commodity prices may extend their declines into the second quarter of next year, said Tim Mercer, chief investment officer of hedge fund Musashi Capital Ltd.

 

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