Alumina prices rise again on unrelenting Pacific, Atlantic tightness

Benchmark alumina prices continued to rise late last week, after still-tight Pacific supplies offset any optimism coming out of progress talks at Hydro’s Alunorte refinery and while workers at Alcoa voted to continue their strike.

Metal Bulletin’s daily fob Australia alumina index ended the week at $634.03 per tonne, rising from $627.81 per tonne on Wednesday September 5.

Hydro’s Alunorte alumina refinery in the northern Brazilian state of Pará signed two agreements with local authorities last week, representing a significant step toward the facility resuming full production, the company said.

“It’s a positive step but what does it really mean for a restart? A refinery can’t suddenly come back all guns blazing,” a trader source said.

Alunorte has been operating at 50% of its usual 6.3 million tpy capacity since March this year when Hydro also declared force majeure on its shipments from the facility, after flooding generated concerns over water contamination – claims Hydro has said are unfounded.

“Refineries aren’t the easiest thing in the world to restart,” a producer said. “There might be some light at the end of the tunnel but in the near term everyone is short to tight,” he added.

Market participants also noted the extension of strike activity at Alcoa’s Western Australian alumina operations, highlighting the likelihood of the market remaining tight, and prices supported, for the time being.

“People are holding on to every cargo,” the trader added.

High alumina index prices have also incentivized the export of Chinese alumina at prices that seem appealing on paper. But so far, availability of Chinese units has had only a limited effect on loosening the tightness in the rest of the world.

Sales of Chinese alumina were reported at $570 and $575 per tonne in the second half of last week.

Some smelters do not have the flexibility or internal approvals to accept Chinese material, despite prevailing cheaper prices. Chinese alumina has performed well in smelter trials but deviates from standard levels of fines, or recognized impurity levels, according to market sources spoken to by Metal Bulletin.

But for those who can diversify their feed, Chinese material will be good option, in an environment where high alumina prices are squeezing smelter profitability.

“You can get the benefit of blending with your other stocks and bringing the average cost of your feed down overall,” a producer said.

Alumina prices are up 69.3% compared with a year ago, while the London Metal Exchange’s three-month aluminium contract is down 2.5% from the same time last year.

A tender for Indian alumina was believed to have been concluded close to $650 per tonne late last week, while a cargo of Indonesian material was purchased at $640 per tonne midweek.

“[The premium over China] is a symptom of the market being very tense,” a second trader said.