Chalco Shares Surge on Plan to Invest in Rare Earths

Xiong Weiping, CEO of Aluminum Corp. of China Ltd.
Xiong Weiping, chairman and chief executive officer of Aluminum Corp. of China Ltd. Photographer: Jerome Favre/Bloomberg

Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, rose by the most in a year in Shanghai trading after its parent announced a plan to invest at least 10 billion yuan ($1.5 billion) in rare earths.

Chalco, as the Beijing-based company is known, rose 10 percent, the daily limit, to close at 10.88 yuan at 3 p.m. local time, the biggest advance since Oct. 9, 2009. The shares climbed 4.3 percent to close at HK$7.32 at 4 p.m. in Hong Kong.

Aluminum Corp. of China, or Chinalco as the state-owned parent is known, yesterday agreed to build rare earth production base in Jiangxi province with a local partner. Chinalco is investing in copper, iron ore and rare earths to diversify as aluminum overcapacity in China and higher power costs shrink profit margins.

“The share jump should relate to its parent’s investment plan in rare earths,” said Heng Kun, a Shanghai-based analyst at Essence Securities Co. “The market expects that Chalco will eventually become a diversified metals producer.”

Chalco Chairman Xiong Weiping said in August he held talks with provincial governments in Jiangxi and Guangxi to win the right to consolidate resources of rare earths, a group of 17 metals used to make parts used in weapons, computers and hybrid electric cars. The company is also studying investments in rare earth smelting facilities, he said.

The venture with Jiangxi Rare Earth & Rare Metals Tungsten Group Corp. will seek to become “a world producer with strong competitiveness and pricing power,” Chinalco said late yesterday in a statement.

China Consolidation

China’s government wants companies including Jiangxi Copper Co. and China Minmetals Corp. to consolidate rare earth resources by buying mines or smelting facilities. The nation, which controls more than 90 percent of the global rare earth market, also cut export quotas this year, forcing prices higher.

The rare earth policy has strained trade relations with countries including the U.S. and Japan. The U.S. has asked business groups and unions to provide evidence that China is hoarding rare earths for a case that may be filed at the World Trade Organization, according to industry representatives who asked not to be identified.

Japanese Economy Minister Banri Kaieda said today that China had instituted a de facto ban on rare earth exports that may have a “big impact” on Japan’s economy. China’s Ministry of Commerce last week said it hadn’t banned rare earth exports to Japan.

Rare earths are 17 chemically similar elements, with names including as neodymium and dysprosium. The oxides are used in the production of equipment for General Dynamics Corp.’s M1A2 Abrams tank and Aegis SPY-1 radar made by Lockheed Martin Corp.

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