Aluminum Corp of China Ltd shares were downgraded to "neutral" at China International Capital Corp after the world's second-biggest producer of alumina had higher production costs than anticipated.

Aluminum Corp was cut from "buy," China International's analysts led by Chris Ding wrote yesterday in a research report.

The country's biggest investment bank also cut the company's target price to HK$9.99 (US$1.27).

Alumina output costs rose 23.3 percent in the first four months, compared with last year, after coal and bauxite prices soared, the Beijing-based company, known as Chalco, said.

Chalco buys the majority of its coal on the spot market. "The gross profit margin of aluminum smelters will further decline in 2008," Ding wrote. "A domestic supply surplus will make it hard for smelters to pass on higher energy and raw material costs to their customers."

Chalco's yuan-denominated shares fell by the 10 percent daily limit to 16.46 yuan (US$2.4) in Shanghai, while the CSI 300 Index, which tracks stocks in Shanghai and Shenzhen, fell 8.1 percent.

Chalco's Hong Kong shares slumped 6.7 percent to HK$12.10, the biggest drop since March 20.

(Shanghai Daily June 11, 2008)