Due To Surplus in Aluminum Capacity, a Number of Enterprises Experienced Loss to Varying Degrees



Due To Surplus in Aluminum Capacity, a Number of Enterprises Experienced Loss to Varying Degrees

Beginning from 2002, in China’s aluminum industry, aluminum output began to show surplus due to dwindling demand from downstream industry; in 2008 China’s aluminum surplus was expected to reach 500,000 tonnes. In recent years, capacity surplus in the aluminum industry has become widely known, in the final analysis, the reason is related to the accelerating speed of capacity expansion year by year. According to statistics, in 2014 China’s aluminum industry fulfilled profit of 41.4 billion yuan, down by 5% on Y-o-Y basis, those with declining net profit are basically aluminum enterprises. Today, as half of 2015 has passed, many aluminum listed companies have released mid-year report, then how about the performance of these companies in the first half of this year?

At present, there are a total of 9 listed companies in China with aluminum business, they are respectively China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd, Chinalco, Yunnan Aluminium Co., Ltd, Nanshan Aluminum Co., Ltd, Western Mining Co., Ltd, Zhongfu Industrial Co Ltd, Jiaozuo Wanfang, Minmetals Rare Earth, and Shenhuo Coal & Power Co., Ltd. Up till August 29, the above-mentioned 9 companies have all released 2015 mid-year report, judging from profit earning condition, Shenhuo Coal & Power Co., Ltd, Zhongfu Industrial Co Ltd and Yunnan Aluminium Co., Ltd experienced loss in net profit, among these three companies, Zhongfu Industrial Co Ltd suffered the heaviest loss.

According to 2015 mid-year report of Zhongfu Industrial Co Ltd, in the first half of this year the company fulfilled business income of 4.422 billion yuan, down by 13.1% on Y-o-Y basis, the company’s net profit experienced a loss of 75.3538 million yuan, down by 152.94% on Y-o-Y basis. According to the company’s mid-year report, due to impact of sluggish demand from the external market and supply-demand relation, aluminum price is still weak, besides within a relatively long period in the future, it will be kept at low level, the upward driving force is limited. Meanwhile pressure of domestic aluminum surplus remains unchanged, in the first quarter partial new production capacity has been released, which creates certain unfavorable impact on the rise of aluminum price. But new energy automobile production, construction of affordable housing, and growth of consumer goods all help the demand of aluminum market maintain strong momentum.

According to the company, the asset impairment loss for the current period is 12.35 million yuan, down by 25.05 million yuan than the same period last year, the main reason is reduction in the provision for decline in value of inventory for the current period; investment income is 2.31 million yuan, down by 23.26 million yuan than the same period last year, the main reason is decrease in profit of affiliated company for the current period; the company’s non-operating revenue is 4.83 million yuan, down by 262 million yuan than the same period last year, the main reason is due to decrease in government subsidy available and reduced income from disposal of non-current assets for the current period. Judging from mid-year report, income of Zhongfu Industrial Co Ltd aluminum business decreased by 26.36% when compared with the same period in the previous year.

Apart from Zhongfu Industrial Co Ltd, Yunnan Aluminium Co., Ltd suffered a net profit loss of 75.249 million yuan in the first half of this year; in its mid-year report, the company said that in the first half of 2015 spot average prices of aluminum ingot from www.cjys.net and Guangdong Nanchu are respectively 12908 yuan/tonne and 12978 yuan/tonne, down by about 1.76% and 1.71% respectively when compared with 13140 yuan/tonne and 13204 yuan/tonne in the same period last year.

Shenhuo Coal & Power Co., Ltd suffered a loss of 28.8364 million yuan in the first half of this year, regarding the reason of loss, the company pointed out that the market of its main product coal experienced weak demand, prices dropped sharply, the company’s coal business experienced first-time weakness of product coal market demand since the company’s inception, sharp fall in price brought first time loss to the company’s business since its inception; Meanwhile, domestic aluminum product market is experiencing over supply, prices stayed at low level, the company’s electrolytic business in Henan region is still trapped in loss status, although aluminum electricity industry in Xinjiang region fulfilled net profit of 181 million yuan, due to sharp drop in aluminum price, it failed to contribute more profit to the company.