So far, China Aluminum's largest investment in aluminum processing has fallen to Chongqing. A few days ago, China Aluminum’s general manager Xiao Yaqing and the Chongqing Municipal Government signed a framework agreement in Beijing. In the next three years, Chinalco will invest 10 billion yuan in Chongqing to build a “China's aluminum processing capitalâ€. Alumina, electrolytic aluminum and aluminum processing are Chinalco's three business segments. However, since the birth of Chinalco, the development of these three sectors has been uneven. As a monopolist in the domestic alumina industry, Chinalco's alumina business is unique in its business structure. After the “fierce†mergers and acquisitions in the area of ​​electrolytic aluminum in the past two years, the power of Chinalco in the electrolytic aluminum industry has also greatly increased, and it is quite a trend of “dominating the worldâ€. Today, Chinalco has finally made great efforts in the aluminum processing industry. A person from the China Non-Ferrous Metals Industry Association stated that China Aluminum’s strong involvement during the gradual heating-up of domestic aluminum processing investment will play a guiding and inhibitory role in preventing the blind competition in the industry. However, if Chinalco takes the similar M&A path in aluminum processing, then how to break through the bottleneck at the same time as the expansion will become a new issue that it must face. Reiterate that Southwest Alpha Xiao Yaqing finally fulfilled his promise. As early as last year when attending the Asia-Pacific Mayors Summit in Chongqing, Shaw had publicly stated that Chinalco is prepared to increase investment by more than 3 billion yuan to build its Southwest Aluminum Group (hereinafter referred to as SWA) into a world-class aluminum processing company. During the “Eleventh Five-Year Plan†period, it achieved sales revenue of more than 10 billion yuan. On March 11th this year, Xiao Yaqing really staked Chinalco's largest aluminum processing investment in Southwest Aluminum. The first is to invest more than 30 billion yuan in a new cold rolling mill production line in Southwest Aluminum and start construction within the year; secondly, two billion yuan will be invested in the transformation of the old southwest aluminum line in the next two years. In addition, the agreement signed by Chinalco and the Chongqing government also includes an investment of 5 billion yuan for Chinalco's production and supply of 800,000 tons of alumina in Nanchuan, Chongqing. A director of Chinalco Propaganda Department stated that this is a manifestation of Chinalco’s strategy of “giving priority to the development of alumina, conditional development of electrolytic aluminum, leap-forward development of aluminum processing, and selective development of non-aluminum industriesâ€. There is no doubt that alumina is Chinalco's core business. Chinalco’s alumina production capacity reached 8.33 million tons last year. Electrolytic aluminum is Chinalco's second largest business. Its production capacity reached 1.5 million tons last year. Today, Chinalco has become the world's second largest alumina producer and the largest domestic producer of electrolytic aluminum. Xiao Yaqing’s plan is to increase the annual production capacity of alumina and electrolytic aluminum to 12 million tons and 3 million tons by 2010 respectively. However, while vigorously expanding alumina and electrolytic aluminum, the irrational distribution of Chinalco's industrial sector has once again become apparent. Last year, China Aluminum’s output of aluminum processing materials was only 410,000 tons, which was obviously “small and large†and was out of proportion to the scale of development of alumina and electrolytic aluminum. According to common practice, international large aluminum companies have a complete industrial chain from the production of alumina to electrolytic aluminum, to aluminum processing and deep processing, so as to enhance their ability to resist market risks. According to the scale of 3 million tons of electrolytic aluminum, Chinalco’s aluminum processing capacity should be at least 2 million tons. Short-legged aluminum processing has become a top priority. How can China Aluminum supplement? According to an industry source, China is the world’s largest net exporter of aluminum, but it is not a strong country for aluminum production. There are thousands of aluminum processing companies, but they are small in scale, with many low-end products, and high-precision aluminum foil and foil products rely mainly on import. Therefore, Xiao Yaqing proposed that aluminum processing should be “leap-forwardâ€, that is, Chinalco must develop the aluminum processing industry at a high starting point to achieve structural adjustment and industrial upgrading. Aluminum deep processing includes recycled aluminum, alloyed aluminum, and aluminum processed materials. Chinalco has first set its sights on SWA. Southwest Aluminum, formerly known as Southwest Aluminum Processing Plant, was established in 1965. It is the largest extra-large aluminum processing enterprise in China with the largest production scale, the most advanced technology and equipment, and the most complete scale. China's high-precision aluminum base and aviation and aerospace materials R & D security base. Last year, the output of Southwest Aluminum reached 290,000 tons, ranking first in the output of individual enterprises of the same industry in the country. “Its products are totally different from the major coastal products exported by Guangdong coastal enterprises.†On March 16, Wu Yikun, Director of the Metallurgical Department of Chongqing Municipal Economic Commission stated that the Chongqing automobile and motorcycle industry uses the southwest aluminum magnesium aluminum alloy sheet. It is because of this that Southwest Aluminum entered the vision of Chinalco as early as five years ago. In 2001, through the equity transfer, the state-owned Southwest Aluminum successfully became a direct subsidiary of Chinalco. Today, the Chinese family's Xiao Yaqing once worked as a four-year veteran at Southwest Aluminum. After the investment of Chinalco is in place, Southwest Aluminum will exceed 500,000 tons in output in the next three years and achieve the goal of “ten billions of southwest aluminumâ€. The Road to M&A Southwest China Aluminum is China Aluminum’s “top card†to achieve a leap-forward development of its aluminum processing strategy, but only one Southwest China can’t satisfy Chinalco’s huge appetite. In order to expand the output of aluminum processing industry, Chinalco decided to use the fastest method to achieve expansion. Xiao Yaqing said, “Now is not a big fish to eat small fish, but fast fish to eat slow fish.†Like Chinalco's large-scale annexation of electrolytic aluminum companies, this approach is to take advantage of mergers and acquisitions of advantageous companies. In fact, as early as 2004, Fujian Ruisheng Aluminum Strip Co., Ltd. (hereinafter referred to as Ruisheng Aluminum Strip) became a “slow fish†in the mouth of China Aluminum. On December 19th of the same year, Chinalco and Fujian Nanping Aluminum, and Millen L.td invested in the formation of Chinalco Ruisong Aluminum Strip Co., Ltd., and Chinalco achieved 50% of its holdings through the reorganization of assets. Chinalco acquired Lanzhou Aluminum in January 2005. The Northwest aluminum processing plant under the Lan Aluminum Company fell into the mouth of China Aluminum, adding more than 50,000 tons of production capacity. Like Southwest Aluminum, Northwest Aluminum Processing Factory is one of the three oldest aluminum processing companies in China. Henan is a major province of China's aluminum industry, and is also Chinalco's main alumina production base. However, the province's aluminum processing materials only have an annual output of 600,000 tons, accounting for only 14% of the country's total output of 4.4 million tons. On June 30, 2005, Chinalco Zhengzhou began laying the foundation for its annual production capacity of 120,000 tons of aluminum processing projects. China Aluminum Corporation saw on the Internet that as early as April 28, 2005, Chinalco had openly recruited the person in charge of the preparation department of Henan Aluminum Processing Base. According to the announcement, China Aluminum's Henan Aluminum Processing Base Construction Office is not only responsible for the construction of new aluminum processing projects in Zhengzhou, but also responsible for the reorganization and integration of the local aluminum processing enterprises to achieve an annual output of 300,000-500,000 tons of Chinalco in Henan Province. The development goal of high-grade aluminum foil and foil processing base. In August 2005, Chalco Henan Aluminum Co., Ltd. was established by Chinalco. The company is jointly funded and set up by Chinalco, China Color Technology Co., Ltd., Yichuan Power Group Corporation, and Luoyang Economic Investment Co., Ltd. The registered capital is 55.98 million yuan. Luoyang Zhongyue Wanji Aluminum Processing Co., Ltd., which was subsequently established, is a holding subsidiary of Chinalco Henan Aluminum, with an annual output of 170,000 tons of high-precision aluminum foil and foil, among which 20,000 tons of high-precision wide-width aluminum foil is produced annually. In the same year, Chinalco continued its attack and signed cooperation framework agreements with the four parties of Luoyang Yichuan Power Group, Xin'an Electric Power Group, and Zhongse Science and Technology Co., Ltd. to jointly establish Chinalco Henan Aluminum Processing Co., Ltd. When it comes to aluminum processing, it cannot avoid Northeast Alloy Co., Ltd. (hereinafter referred to as Dongcao). DongGuan, which was put into production in 1956, is a domestic aluminum production and processing base for aerospace, aviation, nuclear industry, weapons, and warships. It is also a major production and processing base for China's civil aluminum materials. The company's aluminum magnesium alloy processing capacity exceeds 250,000 tons. . The industry speculates that Dongcai, which belongs to the three old aluminum factories in China, will be the next goal of Chinalco's integration. Coincidentally, Xiao Yaqing himself also worked at Dongcao for a long time. When low-cost expansion is advancing rapidly at Chinalco, its cost problems in creating upstream and downstream industrial chains in the aluminum industry cannot be ignored. On March 14th, Xiao Yaqing stated at the Chinalco Annual Report Conference that the company has a good cash flow and no financial problems. As of the end of 2005, Chinalco’s total assets amounted to 100.6 billion yuan, and its main business revenues and profits and taxes totaled 65 billion yuan and 20.5 billion yuan, respectively, and the net assets rate of return reached 18.5%. However, he also stated that it is estimated that coal and other costs will be incurred this year. Will continue to rise, so despite this year will continue to mergers and acquisitions, but capital spending will be controlled to less than 10 billion yuan. In order to expand its cash flow, Chinalco has increased its control costs. On March 16, the director of the Planning and Development Department of Southwest Aluminum stated that in order to reduce costs, the supply of raw materials for Chinalco's aluminum processing business has changed. Originally, the southwestern aluminum used aluminum ingots for aluminum processing, and now the southwestern aluminum is directly processed from precious aluminum and Qinghai aluminum to pull ingots (semi-finished products). As for China Aluminium's domestic A-share listing financing plan that has been started since last year, when will the 8 billion financing amount be put in place? Xiao Yaqing said that it is actively promoting, but there is no timetable and it will depend on opportunities and market conditions.