Alumina prices need to surge for the supply to increase: Goldman Sachs

Goldman Sachs Groups Inc. predicts that in order to spur supply of alumina, which is currently in deficit, the price of alumina needs to be increased.

After the Indonesian ban, the bauxite reserves across the world are rapidly falling, which in turn has caused the Chinese alumina output growth to fall.

According to the Goldman analysts, the price of alumina has to increase to $370/mt by next year’s second quarter and in the second half of 2015, it should be touching $380/mt to encourage supply growth and urge the Chinese refineries to use the more expensive imported bauxite.

They also said, the alumina supply deficit is likely to be around 639,000 tons in 2015 increasing from the recorded 138,000 tons in 2014.

The hike in the alumina prices will also spur new bauxite development and encourage the 6 million tons of production required to meet the rising alumina demand expected in the coming year. The rising alumina prices would also become the incentive needed by the Chinese producers to use better quality bauxites as their stockpiles deplete.