Alumina Ltd upbeat about 2016 alumina prices despite volatility

Alumina Ltd, a 40 per cent business partner of Alcoa World Alumina and Chemicals (AWAC), is seemingly optimistic about alumina market scenario in 2016. The Australian mining company predicted, alumina prices will improve globally this year and says it can withstand any kind of volatility.

Alumina Ltd posted a full year net profit of $US88.3 million ($A122.53 million) after paying for a range of restructuring costs related to shutting down capacity in its Alcoa World Alumina and Chemicals (AWAC) joint venture with metals giant Alcoa. Chief executive Peter Wasow said supply growth overshot alumina demand in 2015, but the current market price was unsustainable.

"We can withstand whatever the market throws at us. We believe some recovery in alumina prices is likely this year but many uncertainties remain," said Mr Wasow. He predicts the alumina market will be tighter in 2016 compared to the "more challenged" aluminium market, and expects more consolidation in the industry as smaller and higher cost refiners struggle, while adding that all Chinese refineries were now losing money.

Alumina's financial result was dragged down by $US170 million in charges, which included impairments against its Portland smelter and Anglesea power station, both in Victoria, and Point Comfort refinery in Texas. Still, the company expects the pressure on alumina prices due to low metal prices and oversupply is going to be a temporary one which would last the forthcoming quarter or so. The company will pay a fully franked final dividend of 1.8 US cents, compared to 1.6 US cents a year ago.

Mr Wasow said Alcoa had recently stipulated $US300 million of productivity improvements for the Alumina segment, which largely represents the AWAC portion.

"That is a significant cost reduction and is coming about through a new approach to procurement, greater focus on productivity and comes on top of continuing improvement. We're hopeful both parties will see this makes sense for both of us and we can agree on the terms," he said.

Alumina's Australian operations include bauxite mines, three alumina refineries in Western Australia and an aluminium smelter, together employing around 5,000 people.