Glencore to take stake in Chinese producer

Glencore International, the Swiss-based commodity producer and trader, plans to take a stake in China’s second-largest aluminium producer, a manager at the company’s Beijing office said on Sunday.

Glencore had signed a memorandum of understanding with Qingtongxia Aluminium, which is based in China’s western province of Ningxia, and would review the company’s operations before deciding on the size of the stake, said the manager, who declined to give details.

A second person close to Glencore said the deal was at an early stage.

Qingtongxia, second only to state-controlled Aluminium Corporation of China (Chalco) in aluminium output, declined to comment.

Glencore combines commodity trading with production operations around the world – its production arm employs over 50,000 people in 14 countries – and already owns stakes in several publicly quoted mining and metals companies in the US and elsewhere.

It is the largest shareholder in Xstrata, the UK-listed mining group currently buying Falconbridge of Canada.

However, it is the first time that the Swiss company, privately owned by its managers and employees, will directly take a stake in a Chinese smelter.

Qingtongxia expects to operate at full capacity and produce 430,000 tonnes of aluminium ingot this year following the completion of a major expansion that had been delayed because of rising production costs, according to trade press reports.

In May, Qingtongxia took over a stake in India’s Ashapura Minechem’s alumina smelter, replacing China’s Sichuan Aostar as a major investor in the project.

Chinese aluminium production capacity has soared by over 60 per cent in the last three years – and now accounts for more than a third of the global total – despite government attempts to rein in investment in the sector.

Chalco, which dominates China’s alumina industry, has been seeking to strengthen its leading position through acquisitions of local rivals.

Chalco, which is listed in Hong Kong and New York, said last week that it had sealed a deal to acquire Gansu Hualu Aluminum, a smelter based in the northwestern province of Gansu that has annual aluminium production capacity of 127,000 tonnes.

Chalco said that it would pay Rmb270m ($34m) to buy a 51 per cent stake in Hualu from Baiyin Honglu Aluminum.

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