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Fitch Affirms China Hongqiao at 'BB-'; Outlook Stable

Metal News - Published on Sat, 27 Jun 2020

Image Source: China Hongqiao
Fitch Ratings has affirmed aluminium producer China Hongqiao Group Limited's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-'. The Outlook is Stable. Hongqiao's ratings reflect its position as one of the world's largest aluminium smelters, with a competitive cost base supported by substantial economies of scale and low input costs. Hongqiao's ratings are constrained by a possible surcharge on its captive power-generation assets, which could significantly increase its production costs. Fitch said “The Stable Outlook reflects our expectation that Hongqiao's industry-leading profitability will allow it to maintain net leverage at a level that is commensurate with its rating, even against the current backdrop of weakened domestic economic activity and depressed commodity prices.”

Resilient Aluminum Profitability: A substantial operating scale and first-quartile cost position protected Hongqiao against significant pandemic-related losses stemming from suppressed manufacturing activity and plunging commodity prices. The company's aluminum profit quickly rebounded when the domestic economy opened up in April and commodity demand picked up, which drove down inventory and raised prices. We believe domestic aluminum prices have stabilised for the remainder of 2020 and expect Hongqiao's aluminum gross profit per tonne to be around CNY1,500 in 2020 and CNY1,700 in 2021, down from CNY2,300 in 2019.

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Posted By : Yogender Pancholi on Sat, 27 Jun 2020
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