Aluminum Corporation of China Stock

Aluminum Corporation of China Limited operates as a vertically integrated aluminum producer with operations in bauxite and coal mining, alumina refining and primary aluminum smelting.

The company also produces ancillary products and services derived from or related to its aluminum operations. In addition, the company engages in trading and logistics of alumina, primary aluminum, other non-ferrous metal products, coal products and raw and ancillary materials in bulk domestically and internationally. The company’s key operating assets include six subsidiaries mainly engaged in bauxite mining; three integrated alumina and primary aluminum production plants; nine stand-alone alumina refineries; seven stand-alone primary aluminum smelters; one stand-alone secondary aluminum producer; four stand-alone carbon production plants; one integrated power generation company with coal mining operations and one institute providing research and development services.

Principal Products

The company is a leading enterprise in the non-ferrous metal industry in China. The company refines bauxite into alumina, which is then smelted into primary aluminum. In addition to alumina and primary aluminum, the company produces and sells chemical alumina products (alumina hydrate and alumina-based industrial chemical products) and carbon products (carbon anodes and cathodes). The company also engages in the trading and logistics of alumina, primary aluminum, other non-ferrous metal products, coal products and raw and ancillary materials in bulk manufactured by it or sourced from external suppliers domestically and abroad. In addition, the company engages in coal mining and power generation. The remainder of its revenues was derived from research and development activities and other products and services. Accordingly, the company organizes and manages its operations in five business segments: alumina segment, primary aluminum segment, trading segment, energy segment and corporate and other operating segment.

The company’s Alumina segment includes the mining and purchasing of bauxite and other raw materials, and production and sale of alumina, as well as chemical alumina. Chemical alumina products are used in the production of chemical, pharmaceutical, ceramic and construction materials. In the process of refining bauxite into alumina, the company produces gallium as a by-product, which is a rare, high value metal with applications in the electronics and telecommunication industries.

The company’s Primary Aluminum segment includes the procurement of alumina, other raw materials, supplemental materials and electrical power, the production and sale of primary aluminum and aluminum-related products, such as carbon products, aluminum alloy products, renewable aluminum and other aluminum products. The company’s principal primary aluminum products are ingots, molten aluminum and aluminum alloys. The company’s standard 20 kilogram remelt ingots are used for general aluminum fabrication in the construction, electricity, electronics, transportation, packaging, machinery and durable goods industries. The company internally produces substantially all the carbon products used at its smelters and sell its remaining carbon products to external customers.

The company’s Trading segment is mainly engaged in the trading of alumina, primary aluminum, aluminum fabrication products, other non-ferrous metal products, and crude fuels, such as coal products, as well as supplemental materials and logistics and transport services to its internal manufacturing plants and external customers. The company established its trading business under Chalco Trading as a separate segment in July 2010 as a result of its operational structural adjustment. Since 2014, the company has established Chalco Materials, Chalco Logistics and Chalco Trading Group to continuously promote and deepen development of its trading business, jointly constituting its trading segment.

The company’s Energy segment includes the research and development, production and operation of energy products, including coal mining and conventional coal-fire power generation, as well as renewable energy generation, such as wind power and solar power. In January 2013, to partially offset its future energy costs, the company established its energy segment after its acquisition of Ningxia Energy in line with its development strategy. In 2022, the company supplied a portion of the electricity it generated for its own production use, supplied a portion of the coal output to its own electric power plant and sold the remaining portion to external customers. The company’s corporate and other operating segment mainly includes corporate and other aluminum-related research, development, and its other activities.

Segments

The company operates through Alumina, Primary Aluminum, Trading, and Energy segments.

The Alumina segment, which consists of mining and purchasing bauxite and other raw materials, refining bauxite into alumina, and selling alumina both internally to the Group’s aluminum enterprises and trading enterprises and externally to customers outside the company. This segment also includes the production and sale of multi-form alumina bauxite.

The Primary Aluminum segment, which consists of procuring alumina and other raw materials, supplemental materials and electricity power, smelting alumina to produce primary aluminum, which is sold to the company’s trading enterprises and external customers, including Chinalco and its subsidiaries. This segment also includes the production and sale of carbon products and aluminum alloy and other aluminum products.

The Trading segment, which consists of the trading of alumina, primary aluminum, aluminum fabrication products, other non-ferrous metal products, coal products and raw materials and supplemental materials and logistics and transport services to internal manufacturing plants and external customers. The products are sourced from fellow subsidiaries and international and domestic suppliers of the Group. Sales of products manufactured by the Group’s manufacturing business are included in the total revenue of the trading segment and are eliminated with the segment revenue of the respective segments which supplied the products to the trading segment.

The Energy segment mainly includes coal mining, electricity generation by thermal power, wind power and solar power, new energy related equipment manufacturing business. Sales of coals are mainly to the company’s internal and external coal consuming customers; electricity is sold to regional power grid corporations.

Production Capacity

As of December 31, 2022, the company’s annual alumina production capacity and primary aluminum production capacity was approximately 22.26 million tonnes and 7.35 million tonnes, respectively. In 2022, the company produced approximately 17.64 million tonnes of alumina (excluding chemical alumina products), 4.29 million tonnes of chemical alumina products and 6.88 million tonnes of primary aluminum.

Sales and Marketing

The company coordinates substantially all of its marketing activities for its self-produced alumina products and some of its self-produced primary aluminum products through Chalco Trading Group. The company’s subsidiaries and branches sell some of its self-produced primary aluminum products directly to external customers. For domestic sales, the company’s alumina refineries sell its self-produced chemical alumina products through Chalco Trading Group for external trading. For international sales, the company’s self-produced chemical alumina products are sold to Chalco Trading Group through Chinalco New Materials Co., Ltd. and Chalco Trading Group is responsible for subsequent external trading. For all of its self-produced products that are sold either through Chalco Trading Group for subsequent external sale or directly to external customers, the company’s subsidiaries and branches play an important role in providing after-sale services and strengthening its presence in the marketplace. Since late 2009, the company has also been engaged substantially in the trading of non-ferrous metal products, including alumina, primary aluminum, copper, zinc and lead, as well as coal products that it sources from third-party suppliers through Chalco Trading Group, or previously Chalco Trading.

Alumina

The company sells its self-produced alumina to external customers primarily through Chalco Trading Group, giving priority to customers with whom it has long-standing relationships and who have established a strong credit history, after reserving sufficient alumina for its forecasted primary aluminum production. In 2022, the company supplied approximately 12.4 million tonnes of alumina produced at its alumina refineries to its smelters, which represented approximately 70.4% of its total alumina production, and sold the remainder to its customers. In addition, the company also procures and sells outsourced alumina under long-term agreements or on the spot market through Chalco Trading Group. The company sold approximately 0.28 million tonnes of outsourced alumina in 2022.

The sales prices of alumina that the company’s alumina refineries sell internally to Chalco Trading Group are determined based on its budgeted sale prices, spot market prices and the prices of primary aluminum on SHFE. Chalco Trading Group coordinates the external negotiation and execution of sales contracts of its alumina products. Chalco Trading Group sells its self-produced alumina and alumina sourced from third-party suppliers to customers throughout China. Most of its major customers in the past three years have been domestic smelters. The company primarily sourced alumina from third-party suppliers on the spot market.

Chalco Trading Group sells the company’s self-produced alumina and outsourced alumina under spot sales agreements and long-term sales agreements with terms ranging from one year to three years. The company’s long-term sales agreement for alumina normally sets forth the quantity of alumina to be sold by it in each month and each year, the price determination mechanism, payment method, place of delivery and delivery method. Places of delivery under its sales agreements are arranged to be where it could efficiently manage the transportation of alumina. The company’s customers are normally required to pay for their procurement before each delivery.

Primary Aluminum

The company sells all of its self-produced and outsourced primary aluminum to domestic customers. The company expects China to remain its key market for primary aluminum for the foreseeable future. Customers of the company’s primary aluminum products principally consist of aluminum fabricators and distributors that resell its primary aluminum products to aluminum fabricators or other purchasers.

To improve the efficiency of its distribution, the company divides its China market into the following regions: southern China (including Guangdong and Fujian Provinces); eastern China (including Jiangsu and Zhejiang Provinces and Shanghai Municipality); southwestern China (including Sichuan Province and Chongqing Municipality); the Beijing-Tianjin-Tanggu area; and central China. In general, the company purchases products from its nearest smelter to minimize transportation costs.

The company’s primary aluminum smelting subsidiaries and branches sell a portion of its primary aluminum output directly to external customers. Each of its smelters is normally responsible for the sale of products to the customers from neighboring markets, negotiating the pricing and delivery terms based on market conditions.

The company’s primary aluminum smelting subsidiaries and branches also sell a portion of its primary aluminum output internally to Chalco Trading Group at prices based on the spot prices of primary aluminum on Yangtze or Nanchu. Chalco Trading Group then coordinates the external sales of primary aluminum. Chalco Trading Group sells the company’s self-produced primary aluminum products to external customers through the following three channels:

Contract Sales: Most of the company’s primary aluminum sales are made pursuant to contracts entered into directly with its long-standing customers. The terms for the company’s sales contracts for primary aluminum are typically one year.

Sales on the SHFE: As part of its effort to manage market risk, the company sells a portion of its primary aluminum products on the SHFE through futures contracts with terms ranging from one month to 12 months to hedge against declines in primary aluminum prices.

Sales on the Spot Market: The company also sells its primary aluminum products on the spot market at prices with reference to various factors, such as market spot prices and transportation costs.

In addition, the company procures and sells outsourced primary aluminum on the spot market or through short-term futures and options transactions. The company sold approximately 4.24 million tonnes of outsourced primary aluminum in 2022.

Chemical Alumina Products and Gallium

Chemical alumina products are derived from the company’s alumina production. The company adjusts its production of these products based on market demand. The company’s alumina refineries sell its chemical alumina products directly to external customers or indirectly to external customers through Chalco Trading Group for subsequent external trading. The company sells most of its chemical alumina products in China.

In addition, in the process of refining bauxite into alumina, the company produces gallium as a by-product. The company adjusted its production of gallium based on market demand.

Coal

Ningxia Energy sells a portion of its self-produced coal directly to external customers through short-term contracts at prices determined through negotiations with the company’s customers, taking into consideration factors including its procurement prices and prevailing market conditions. Ningxia Energy consumes the rest of its self-produced coal at its own electric power plant.

In addition, the company procures and sells outsourced coal under long-term agreements or on the spot market through Chalco Trading Group. The company sold approximately 2.07 million tonnes of outsourced coal in 2022.

Trading of Outsourced Non-ferrous Metal Products and Other Materials

Since late 2009, the company has been actively engaged in the trading of alumina and primary aluminum sourced from third-party suppliers. Through Chalco Trading Group, the company also sells other non-ferrous metal products, such as copper, zinc and lead, as well as coal products that it procures from its third-party suppliers to external customers on the spot market or under long-term sales agreements. The company sells outsourced raw and ancillary materials, such as iron ore, charred coal and cathode copper in bulk to customers, such as steel manufacturers and copper processing companies on the spot market. Chalco Trading Group has a team with trading expertise to conduct research on the markets of non-ferrous metal products and other materials.

Research and Development

In 2022, the company completed 42 technological projects, including 26 special key science and technology projects and 16 science and technology application projects. In addition, the company filed a total of 422 patent applications in 2022.

As of December 31, 2022, the company owned 3,465 patents, which were primarily related to technologies and processes, equipment and new products. Once granted, a patent in China for an invention is valid for 20 years and for a utility model or a design 10 years from the date of the patent application. As of December 31, 2022, the company owned 25 trademarks, each of which had a term of 10 years.

The company’s research and development expenses included RMB4,805.2 million for the year ended December 31, 2022.

Regulations

The company is principally subject to governmental supervision and regulation by four agencies of the PRC government, such as the China National Development and Reform Commission (NDRC), the Ministry of Natural Resources of China, the Ministry of Industry and Information Technology of the PRC (MIIT), the Ministry of Ecology and Environment of China, and China Securities Regulatory Commission.

History

Aluminum Corporation of China Limited was founded in 2001. The company was incorporated as a joint stock limited company under the Company Law of the People's Republic of China in 2001.