SHANGHAI: Chinalco, the Chinese aluminum giant that led a $14 billion investment in Rio Tinto, is more likely to raise its stake than reduce it, its president said Tuesday.

“I feel the price was very good,” said the president, Xiao Yaqing. “It was a very appropriate price. The price was not high considering Rios value. In the current circumstances, the possibility of raising the stake is higher than cutting it.”

Chinalco and the U.S. aluminum company Alcoa jointly bought 12 percent of Rios shares listed in London, or 9 percent of the total, on Jan. 31 at an average price of almost 59, or $120, per share. The shares closed at 50.61 on Monday.

Xiao declined to say how many shares the two firms might buy if they raised their stakes. But no move is imminent.

“Alcoa and Chinalco have not made a plan for the next move yet,” he said.

The companies made the 12 percent purchase under a one-month agreement, now expired, that had allowed a stake of up to 14.9 percent of shares listed in London.

Rio also has a listing in Sydney and, under Australian law, foreigners can buy up to 15 percent of an Australian company before they must seek government approval to buy more.

Xiao has said he filed papers with the Australian authorities as a courtesy, even though the initial purchase did not involve Australian shares.

Chinalco controls Chinas largest alumina and aluminum producer, Aluminum Corp. of China, also known as Chalco.

Xiao said he expected aluminum prices to stabilize this year at around 20,000 yuan, or $2,821, a ton in China and at about $3,000 a ton on the London Futures Exchange, partly because of strong demand in China.

“The prices can help us to offset losses during the production halt hit by the severe weather in the winter,” Xiao said, adding that Chalco lost about 200,000 tons of aluminum production out of Chinas overall loss of 500,000 tons to 600,000 tons.

Xiao also said Chalco did not plan to cut its alumina prices. The companys prices are about 18 percent higher than its Chinese competitors.

He said he expected China to become a net importer of aluminum in the fourth quarter of 2008.

Chalco, the fourth-largest aluminum producer in the world, reported annual earnings that were below expectations Monday after it failed to offset weakening prices and high production costs by increasing output, and analysts say it could have a tough time in 2008.

St. Luke’s Hospital in San Francisco’s Mission District will no longer be an acute-care facility after 2009, but become an outpatient “hub,” providing emergency care and services that don’t require a hospital stay, according to a plan announced Friday by California Pacific Medical Center.

Downgrading St. Luke’s to an ambulatory care center is part of a $2.4 billion master plan by Cal Pacific, the city’s largest private nonprofit hospital, which includes a $1.7 billion proposal to build a 425-bed hospital on the site of the Cathedral Hill Hotel on Van Ness Avenue at Geary Boulevard.

In addition to the changes at St. Luke’s, Dr. Martin Brotman, Cal Pacific chief executive officer, also announced:

– The hospital’s Pacific campus in Pacific Heights eventually will become an outpatient facility like St. Luke’s.

– Three new clinics will be built, in the Stonestown area, the Excelsior and Potrero Hill. Cal Pacific also has opened the Bayview Child Health Center on Evans Street.

– Acute-care services ultimately will be concentrated at Cal Pacific’s Davies campus at Castro and Duboce streets and its new Cathedral Hill hospital.

State laws that require California hospitals to meet seismic safety standards by 2015, at the latest, add momentum to Cal Pacific’s plans. Hospital officials hope to have the Cathedral Hill facility built by 2014.

But, judging from the immediate reaction of city and county health officials, Cal Pacific will have a tough time getting city and county approval for the changes at St. Luke’s. And the hospital needs that approval to go forward with its plans to build a hospital at Cathedral Hill.

“This is not the right thing for the health of San Francisco,” said Dr. Mitch Katz, head of the city’s Public Health Department.

Katz argued that the plan leaves one acute-care facility - the public San Francisco General Hospital - in the South of Market region, while it concentrates eight hospitals in the northern, generally more affluent parts of the city. He also didn’t think providing the St. Luke’s neighborhood with emergency services - but not a hospital to back up that care - made sense.

“It isn’t optimum care,” Katz said. “If you had something serious, would you want to go to a hospital where, if it turned out you had something serious, they couldn’t take care of you?”

The future of St. Luke’s has been in question since 2001, when the independent Cesar Chavez Street facility was absorbed by giant hospital operator Sutter Health, also the parent company of California Pacific.

Sutter Health took over the hospital after St. Luke’s in 1999 sued both Sutter and Cal Pacific on antitrust grounds, claiming they were undermining it by luring away doctors. On Jan. 1, 2007, St. Luke’s became the fourth “campus” of Cal Pacific.

St. Luke’s has long been a money-losing operation, racking up $30 million to $35 million in annual losses in recent years.

With a high number of patients who are uninsured or on government programs like Medi-Cal, the hospital has had a hard time making ends meet. St. Luke’s also handles less severe cases, which are reimbursed at lower rates, because higher-level services are concentrated at other campuses.

Only 50 to 60 patients are hospitalized at St. Luke’s on any given day, leaving about 60 percent of the hospital’s beds empty, hospital officials said. In addition, they estimate that about 85 percent of St. Luke’s annual 30,000 emergency visits could be handled in a primary or urgent-care setting.

Brotman called it “impractical and unrealistic” for Cal Pacific to continue to absorb St. Luke’s losses and said turning St. Luke’s into an outpatient facility with an emergency department will allow the hospital to continue to offer services in the area.

“It would have been easiest to let (St. Luke’s) pursue its path to bankruptcy,” he said. “Then there would be nothing.”

Judy Li, chief administrative officer for St. Luke’s, said the plan will improve services for residents in the Mission and surrounding areas by offering the care they need that also is sensitive to cultural and language differences.

“What I see in front of us is a fundamental opportunity for us to improve the health of underserved patients,” she said.

But several labor leaders aren’t buying the hospital’s arguments.

“You cannot have an emergency room without a hospital,” said Chuck Idelson, spokesman for the California Nurses Association, which is embroiled in a labor dispute with Sutter-affiliated hospitals in the Bay Area. “It is an empty promise to the community. To have an intensive care unit without an operating hospital … it is impossible to have real emergency care services.”

Sal Rosselli, president of Service Employees International Union United Healthcare Workers-West, a Sutter critic, said he’s been expecting this announcement since Sutter took over St. Luke’s. “The problem is no amount of profit is enough for them,” he said.

Katz, of the Public Health Department, said Cal Pacific should invest in St. Luke’s and create a state-of-the art facility that will draw top-notch physicians as well as patients from nearby Noe Valley and Glen Park who are more likely to have private insurance.

“The reason I believe they don’t want to build on St. Luke’s campus is because they don’t want to see more people without insurance and on Medicaid,” Katz said.

Brotman rejected the accusations. “There will be voices raised that suggest our motives are other than what they are,” he said. “The proof is in the outcome.” The future of St. Luke’s Hospital

The St. Luke’s campus of California Pacific Medical Center no longer will be an acute-care facility with inpatient services after 2009.

Services to be transferred to other Cal Pacific facilities: acute medical/surgical; critical care; interventional radiology; nuclear medicine; obstetrics; neonatal intensive care; oncology; acute rehabilitation, physician and occupation therapy; renal dialysis; sub-acute and skilled nursing.

Services to be added/retained at St. Luke’s: ambulatory surgery; Breast Health Center (mammography); cardiac diagnostics; Child Development Center; Diabetes Clinic & Education; GI Endoscopy Health Care Center; imaging (CT, MR, ultrasound); infusion therapy; lab services; primary care (medicine, pediatrics, geriatrics); outpatient pharmacy; speech therapy; pulmonary/respiratory therapy; urgent care and standby emergency department.

Source: California Pacific Medical Center.

E-mail Victoria Colliver at vcolliver@sfchronicle.com.

Financial stocks roared back on Tuesday morning as a pair of better-than-expected earnings reports from Wall Streets biggest firms spurred an opening rally ahead of a likely rate cut from the Federal Reserve.

With investors looking for the Fed to lower its benchmark interest rate Д and some expecting the steepest cut in a generation Д the stage was set for a optimistic bounce after Mondays mixed performance.

Shortly before noon, the Standard Poors 500-stock index was up 2.7 percent, erasing its losses from Monday. The Dow Jones industrials were up 290 points, and the Nasdaq composite index was up 2.3 percent.

Lehman Brothers, whose share price plummeted 19 percent on Monday as rumors swirled that the bank was facing liquidity problems, gained back nearly all its losses after reporting a 57 percent decline in net income for the first quarter. That figure beat expectations and restored some confidence; its stock rose 38 percent, to $43.91 a share, at 11:30 a.m.

Goldman Sachs reported a 53 percent earnings decline, also better than Wall Street estimates, and its shares rose 13 percent, to $170.29 a share.

The Wall Street firms led a resurgence in financial stocks, which took a severe beating on Monday after the near-collapse of Bear Stearns spurred credit fears around the globe.

Foreign stock markets rose in overnight trading on the strength of banks and financial services firms, though some could not pare their losses from Monday. The Nikkei 225 in Tokyo gained 1.5 percent and Hong Kongs benchmark Hang Seng index rose 1.4 percent.

In Europe, indexes in London, Paris and Frankfurt were all up more than 3 percent in late afternoon trading.

The yields on Treasury notes, some of which reached 50-year lows on Monday, climbed back on Tuesday, and commodities like oil and wheat recovered from a sell-off a day earlier. Gold set another record high and the euro gained against the dollar.

Still, Wall Streets focus remains squarely on the outcome of Tuesdays Fed meeting. Future markets are continuing to predict a full percentage point cut to the federal funds rate, which affects mortgage rates, car loans, and other consumer transactions. A lower interest rate can stimulate growth in the economy but also lead to higher prices and a devalued dollar.