Aluminum Corp of China, known as Chinalco, could be about to expand in the southwest of the country after two metals firms in Yunnan province made reference to the state-owned company as they flagged a possible change in ownership. The move would be consistent with efforts at consolidation in China's crowded metals sector.

Yunnan Aluminium and Yunnan Chihong Zinc and Germanium said on Wednesday that their ultimate owner, the Yunnan branch of the State-owned Assets Supervision and Administration Commission (SASAC), was planning to use its controlling stake in them to cooperate with Chinalco. These stakes are held via Yunnan Metallurgical Group. Trading in Yunnan Aluminium and Yunnan Chihong's shares is set to resume on Thursday, having been suspended since Jan. 18 pending major announcements. No formal deal has yet been signed but the parties are "actively negotiating and pushing forward the process of this transaction," Yunnan Aluminium said in a statement to the Shenzhen stock exchange. Asked if Chinalco was going to acquire Yunnan Aluminium, a spokesman for Chinalco said he had no related information.

Yunnan Aluminium has a smelting capacity of around 1.6 million tonnes per year, versus around 4 million tonnes per year for Chinalco, China's biggest state-owned aluminium firm. Yunnan Aluminium on Tuesday said it expected annual profits to rise by around 488 percent in 2017. A third Yunnan metal company, Yunnan Copper, whose parent is part of Chinalco, had trading in its shares halted at the same time and also said trading would resume on Thursday.

Copyright Reuters, 2018