It has subtly kept open the option to cash out of its holdings of $7.2-billion worth of Rio Tinto bonds instead of converting them into shares, said Tony Loo, General Manager of Rio Tinto China, in an interview with China Times. This would deliver a boost to Chinalco's balance sheet, he said.

Even before the bonds mature, the company could still rake in juicy returns that yield 9 percent annually, much higher than the loan interest rates, analysts said. Chinalco's status as an industry leader also makes it easier to raise money from the capital market, they said.

Increasingly aware of an inevitable end to the past boom times, the group is skimping on costs wherever possible, to weather the current global economic chill. It had last year imposed a hefty cutback on senior executives' salaries. More importantly, it curtailed its production capacity by around 30 percent to ease the market saturation and provided a floor under slumping aluminum prices. But the sizable production cuts have not yet made much difference to the depressed markets.

In the meantime, Chalco also pledged in its annual report not to waver in its expansionary commitment, although this year's capital expenditure will fall 34 percent to 13 billion yuan ($1.9 billion). The company since last year has taken over five domestic aluminum processors while its parent group set out on a buying spree for overseas assets, including Rio Tinto's core mine assets and the Toromocho mining project in Peru.

Some analysts interpret the company's expansion as an effort to diversify its growth model and secure long-term resource supplies, but most agree that they are less likely to turn around their entrenched gloom in the short term.

"An adequate response to the downturn requires decisiveness and flexibility in strategies," said Luo. "We are geared up to tide over the storm with tight cost control and higher synergies in both production and management."

Boom or bust?

Aluminum is not the only base metal that has sagged under the weight of lower demand, but its ailment appears to be the worst because of a record-high inventory that has pushed down prices. The government has purchased massive amounts of aluminum as a reserve to help absorb the overcapacity. Yet, the cheap clearance sale was believed to only soften, not eliminate, the industry's pains.

Although it remains to be seen whether this year will bring more tough times for Chinalco, the government is trying its best not to let that happen. It has put in place a variety of recuperative steps, including tax breaks and more funding support for aluminum producers. It is even expected to reinstate the 5-percent tax on imports of primary aluminum it had lifted two years ago in a bid to buck up domestic prices.

On top of these support measures is a pilot program that allows electrolytic aluminum makers to skip the power grid companies and purchase cheap electricity directly from the generators. This should be a boon for Chinalco, whose electrolytic aluminum accounts for 40 percent of its total output.

Another source of confidence is that domestic prices have recently regained some ground on the back of recovering aluminum demand from the automobile, transportation and building sectors. The price of aluminum on the Shanghai Futures Exchange has bounced back to nearly 14,000 yuan ($2,048) per ton-a threshold for positive margins.

Analysts say the industry has showed some signs of bottoming out, but it will take more policy moves to create a prolonged rally. Lu Youqing, Deputy General Manager of Chinalco, projects that the markets will start to come into full swing this June, making it achievable for the group to earn profit of 5 billion yuan ($731.5 million) this year.