Aluminum Corp of China Ltd (Chalco) (2600.HK: Quote) (601600.SS: Quote), the world's largest aluminium firm by market value, posted a bigger-than-expected net loss in the fourth quarter, its first deficit in a decade, and warned of a first quarter loss.

Chalco and its global competitors, including aluminium giant Alcoa (AA.N: Quote), which reported a second consecutive quarterly loss in March, are suffering as the global economic downturn has eroded demand for the versatile metal used extensively in transport and packaging.

Since 2009, the company is still facing an exceptional business landscape. It is expected that the company will record a loss in its net profit for the first quarter of 2009, Executive Director Luo Jianchuan said in a statement.

Chalco, whose parent Chinalco is offering $19.5 billion to buy Rio Tinto (RIO.AX: Quote)(RIO.L: Quote) assets and convertible notes that would double its Rio stake to 18 percent, said it will reduce investment scale and improve investment structure to weather the challenging market in 2009.

Chinalco said last Friday that it arranged a $21 billion loan to finance the planned Rio tie-up.

London Metal Exchange benchmark aluminium MAL3 prices have dropped 7.8 percent this year to about $1,420 a tonne after falling 36 percent in the fourth quarter last year.

We think all (Chalco) segments are not profitable at the moment, with alumina being the worst, Citi Investment Research said in a report earlier this month.

China's top producer of alumina and primary aluminium, posted an October-December 2.57 billion yuan ($376.2 million) net loss, compared with a restated 1.49 billion yuan profit the previous year, based on Reuters calculations from previously released data.

That came in worse than an average forecast for a net loss of 260 million yuan from 13 analysts polled by Reuters Estimates.

Full-year net profit plunged 99.9 percent to 9.2 million yuan from a restated 10.75 billion yuan in 2007, as the company was hard hit by disasters including snow storms and earthquakes in China, the international financial crisis, raw material price hikes and sharply lower commodities prices, the company said in a statement on Sunday.

Its revenue fell 9.9 percent in 2008 to 76.7 billion yuan.

In light of the slackening global economic growth, significant decline in demand for aluminium and plummeting aluminium prices, the group's operation and production will face enormous difficulties and challenges in 2009, it said.

Chalco shares have rebounded 170 percent from their October lows on a series of positive government policies, including state purchasing of aluminium and lower power tariffs to protect the domestic industry.

Some investors have snapped up the stock on hopes that Chalco stands to gain if its parent succeeds with its Rio deal.

Chalco trades at 1.07 times price-to-book, or at a premium to industry leader Alcoa Inc's (AA.N: Quote) 0.63 times.

Citi says that looks unjustified. Alcoa's share price was much lower than the 1-1.5 times price-to-book range seen in 1992-93, suggesting a much deeper downturn for the aluminium industry this time around, Citi noted. (Reporting by Alison Leung; Editing by Ian Geoghegan and Ruper Winchester)

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