China Zhongwang Holdings Co, a maker of aluminium products, said on Friday it had been notified of "severe difficulties" at two subsidiary companies, as Chinese prices for the metal hit a 15-year record high.
Liaoyang Zhongwang Superior Aluminium Fabrication Co and Liaoning Zhongwang Group Co are facing problems due to "major losses and business hardship," Zhongwang said in a statement to the Hong Kong stock exchange, without elaborating.
Zhongwang is the world's second-biggest manufacturer of aluminium extrusions widely used in the transport, construction and electronics industries. It needs to purchase aluminium ingots in order to make its products, having sold its smelting operations https://www.reuters.com/article/china-aluminium-zhongwang-idAFL3N2AQ3UV last year.
Aluminium ingot prices on the Shanghai Futures Exchange rose as much as 3.9% in night trading on Friday to 24,700 yuan ($3,834) a tonne, the highest since May 2006, as curbs on electricity usage by smelters leave the market fearing a shortage of supply.
Zhongwang said in its 2020 annual report in April it had "not entered into any aluminium ingot forward contracts to hedge against aluminium ingot price fluctuation risk."
Furthermore, Zhongwang is headquartered and has a major production base in the city of Liaoyang, in China's northeastern province of Liaoning, one of the regions hardest hit by widespread power shortages that have hobbled industrial output.
The subsidiaries "are unable to overcome the difficulties on their own notwithstanding many efforts made" and are "engaged in active communications" with relevant parties in a bid to help ensure smooth and orderly operations, Zhongwang said.
Trading in Zhongwang's shares has been suspended since Aug. 30 pending publication of inside information and the company's financial results for the first half of 2021. ($1 = 6.4340 Chinese yuan renminbi)- Reuters