By staff reporter Chen Qian

Falling aluminum prices and rising material costs have trimmed aluminum producer’s profits in the latter half of 2008. Aluminum Corporation of China (SSE: 601600; Chinalco), the country’s biggest aluminum and alumina producer, is a prime example of how tightly these companies are being squeezed.

According to Chinalco’s third quarter financial results, the company’s total revenue from July to September dropped 7.9 percent year-on-year to 19.08 billion yuan. With a net profit of 183 million yuan for the third quarter, Chinalco earned 93 percent less than the same period last year.

From first nine months this year, Chinalco realized revenue of 8.7 billion, down 7.4 percent on the same period last year. Net profit dropped 72 percent year-on-year to 25.8 billion yuan.

Chinalco blamed the profit slump on the rising price of raw materials and fuel, as well as the declining prices of aluminum products amid the global economic slowdown.

Statistics from China Nonferrous Metals Industry Association shows that as of October, prices of nonferrous metals including copper, aluminum, lead, zinc and nickel have all witnessed dramatic drops in both the domestic and international markets. In mid October, the domestic price of aluminum was 14,000 yuan per ton, a 16 percent drop on the price of September 10. Copper’s October price was 40,000 yuan per ton, down 27.6 percent from the previous month.

Officials from the association predicted that China’s aluminum refining companies would suffer losses in the forth quarter this year, and that annual profits for the industry may shrink as much as 50 percent year-on-year. Also expected is a 20 percent profit drop for China’s nonferrous metals industry this year.

Facing the price slump, Chinalco announced October 22 a production cut of 720,000 tons per year, which is about 18 percent of the company’s annual capacity.

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