Chinese aluminum firm Chalco files $600 mln ADS IPO

REUTERS ^ | Wednesday November 7, 9:27 am Eastern Time

[American_Patriot_For_Democracy]

WASHINGTON, Nov 7 (Reuters) - Aluminum Corp. of China Ltd., the largest producer of primary aluminum in China, has filed with U.S. securities regulators for an initial public offering of $600 million worth of American Depositary Shares.

The Beijing-based company, also known as Chalco, said the ADSs represent its overseas listed foreign invested shares, or H shares. Each ADS equals 100 H shares, it said on Tuesday in the filing with the U.S. Securities and Exchange Commission.

The number of ADSs and the price range have not been determined yet, but the company said the ADSs have been approved for listing on the New York Stock Exchange under the ticker symbol ``ACH'' (NYSE:ACH - news).

The ADS sale is part of a global offering of H shares, including in Hong Kong. Chalco has also applied to list the H shares on the Stock Exchange of Hong Kong Ltd.

Morgan Stanley, China International Capital Corp. and Merrill Lynch are underwriting the offering.

Chalco, established in September 2001 as part of the restructuring of China's state-owned aluminum industry, said it will use $80 million of the net proceeds to reduce debt with the rest of the money going for capital expenditures and general corporate purposes.

The company's main activities include refining bauxite into alumina and smelting it to produce primary aluminum. Chalco said it is the only producer of alumina in China and, in 2000, was the third largest alumina refiner in the world, according to the SEC filing.

Its production of 669,800 tonnes of primary aluminum accounted for 23.7 percent of total domestic production last year. China's next largest domestic primary aluminum producer in 2000 accounted for about 4.2 percent.

Aluminum Corp. of China, or Chinalco, was formed in February 2001 to own and operate 12 state-owned producers and distributors of alumina, primary aluminum and other products.

Following the global offering, Chinalco will continue to be Chalco's biggest shareholder, the filing said.

Alcoa Inc.(NYSE:AA - news), the world's largest metals producer, has said it will take an 8 percent stake in Chalco. The stake would be subject to a 30-month lock-up, pending the completion of a joint venture proposal in which Chalco would sell half of its wholly owned Pingguo unit to Alcoa by January 2003.

[notyourregularhandle]

NEVER FORGET

[Robert357]

Thank you for the post. What I find interesting about this is that there currently is an oversupply of Aluminum Production Capacity in the world. In the past Aluminum production in the US, which is mostly (not all) in the Pacific Northwest has fought for its very existence. I have heard Aluminum Company representatives complain about Russia dumping aluminum way below cost just to get hard currency. Right now most of the Aluminum in the Pacific Northwest is shut down for about between one and two years because of a drought and high power prices combined with weak world Aluminum prices.

Usually, the newest Aluminum plants are the most efficient. That combined with the massive Chinese 7 Gorges hydro project should pretty well spell the economic death knell for PNW Aluminum. That in turn will dramatically change the generation supply vs. demand balance in the PNW and in the Western US including California. It also means that a very strategic material will no longer have huge production capacity in the US. I guess in the future, Boeing airplanes will be manufactured from Chinese Aluminum!

Thank you for the intersting information.

[snopercod]

Boeing airplanes will be manufactured from Chinese Aluminum!

...and the aircraft themselves, no doubt.

[Dog Gone]

Excellent analysis. In no small measure, the California Power Crisis, which Governor Davis made worse, set in motion a chain of events which ultimately left the aluminum plants in the PNW without power.

Now that production is shifting overseas.

It may have happened eventually anyway, but it's these little ripple effects from the decisions we make that are not generally appreciated at the time.

[Carry_Okie]

I agree with your thesis re the strategic value of domestic production and have warned about it for years. Boeing already has joint ventures going in Russia. They have some very good engineers over there for very cheap. The intent is to create demand for increasing air freight, much of it to import FOOD. We are already a heavily negative primary food importing nation. Our ag surplus is almost entirely grain (feed for the cattle and pigs we import).

[Ernest_at_the_Beach]

We are already a heavily negative primary food importing nation. Our ag surplus is almost entirely grain (feed for the cattle and pigs we import).

Where do you get this?

I am not aware of significant importing of cattle or piglets into the major production centers in the heartland.

[Ernest_at_the_Beach]

So China is going to build more Aluminum production capacity , I think that is good.

If the rains come back might some of our production in the PNW come back?

[Southack]

Electricity and water are the main costs to producing ALuminum, not labor, so China holds no inherent advantage over U.S. AL production. They also have to cope with the expense of shipping it here...

[Carry_Okie]

I posted some numbers and a source document here. For every cow we export we import 10. The nuber that saves it is that we export processed beef, but a lot of that is headed for Maquiladoraland. The ratio is about twice that for pigs. Much of what we call American beef is merely butchered here. It comes from as far as Pakistan and tranships through Mexico under NAFTA.

Here is the source for the reference post:

U.S. Agricultural Trade and the Millennium Round of the World Trade Organization: Issues and Prospects
by Parr Rosson & David Schweikhardt, Texas Agricultural Experiment Station and Flynn Adcock & Monika Tothova of Michigan State University. Yep. It's that bad.

[Carry_Okie]

One does have to wonder how it is that foreign agriculture can be so much less expensive. I certainly isn't labor costs, because our systems are so mechanized. The strong dollar certainly counts, but it isn't enough to explain it either when you realize that we are exporting feed and then importing animals. When one considers the transportation component, and the duties, it becomes obvious that there is only one reasonable explanation: Cost of regulatory compliance and the urban democratic demand for control of land pursuant to environmental claims and for residential use.

Read any good books lately?

[Ernest_at_the_Beach]

LOL!

Honest I am working on it!

I have this problem with getting my material
and tests finished in my math classes!
I am behind where I should have the students
and I think the department is sending out the
sheriffs to check on the part time help!

[snopercod]

Yep. It's that bad. You're just trying to cheer us up, aren't you?

[snopercod]

The state of NC has a lot of hog farms. The state government is litterally killing them off with their water quality regulations. The ones that chose not to move elsewhere are having to install barriers to keep the pig $hit from touching the soil, in effect. Might increase the nitrates in the groundwater, you know.

Same thing with cattle. Barriers must be installed so no cow exhaust can get within several hundred feet of a stream.

BTW, the scenario you described in your book where septic permits are used to deny development is being played out here in my area. Not as bad as in SC...yet...

[Carry_Okie]

Barriers must be installed so no cow exhaust can get within several hundred feet of a stream.

Now, iffen dey were bison, see, and iffn yew wert Neightive Murkin, et wood bee hokey dokey, cuz dat wuss beeze knatchurl pro-cess of liminashun.

[Robert357]

so China holds no inherent advantage over U.S.

"inherent advantage" = 7 Gorges Hydro Project excess capacity

The 7 Gorges Hydro project is so huge that the electric demand in China will be much smaller than the project. This means that the Chinese need new electrical industries like Aluminum production to make reduce the cost of power to the rest of the Chinese users. They can sell the power cheap especially if it helps provide jobs and hard currency for the exported aluminum.

[SierraWasp]

Who's fraid of a few heifer farts, anyway? C'mon "Bossie," cut the cheese!!!

[Carry_Okie]

How competitive with Russia will China be in that market?
Doesn't Russia hold the better sources of ore?

[shaggy eel]

BUMP