Aluminum maker Guanlv dodges delisting

Shanxi Guanlv Co. Ltd., part of China Minmetals Corp. and Shanxi Province's largest nonferrous smelter, expects to return to profit in 2011 after three consecutive years of losses, thereby avoiding a delisting from the Shenzhen Stock Exchange, according to a Jan. 9 filing.

The aluminum product maker anticipates yearly earnings of RMB 10 million ($1.58 million) to RMB 12 million ($1.90 million) on the back of higher aluminum ingot prices in the first half, lower overheads and improved performances from subsidiaries, including the Shanxi Huasheng Aluminum Co. Ltd. joint venture.

The filing comes despite hikes in national and regional power tariffs on Dec. 1 which the firm said would shave some RMB 4 million ($632,910) from its annual earnings in a press release dated Dec. 14.

Weaknesses in the aluminum market and high overheads pushed Guanlv into the red in 2008, and its shares were suspended from trading in March last year after three consecutive years of losses. The firm can apply to resume trading after issuing its 2011 annual report, though it has yet set a release date.

The company lacks on-site power generation, exposing it to rising electricity costs, and only this year managed to make technological improvements to improve production efficiencies, CRU analyst Wan Ling told Interfax Jan. 10.

Despite Guanlv's positive prognosis for 2011, China's aluminum makers face a tough year ahead with prices on the Yangtze River Non-ferrous Metals Spot Market hitting a trough of RMB 15,500 ($2,452.53) per ton at the end of December, down from a yearly high of RMB 18,600 ($2,943.04) on Aug. 4.

Prices are likely to hover around RMB 16,000 ($2,531.65) per ton in the first quarter this year, traditionally a low season due to the Chinese New Year holidays, China Commodity Data Group analyst Fan Yanxia told Interfax.

Soft demand globally will continue to exert pressure on prices in the near-term and the capacity utilization rate among domestic aluminum profile producers now stands below 60 percent, Fan added.

Based in Yuncheng City in north China's Shanxi Province, Guanlv is primarily engaged in the production of aluminum ingots, aluminum products, and alumina powder. The firm's parent company, state-owned Shanxi Guanlv Group, was acquired by leading government-owned Chinese metals trader Minmetals in 2008.