Alumina producers’ shares climb world-wide as a result of Hydro’s production shut

Alumina producers, including South 32 and Alumina Limited, on Thursday, October 4, reportedly experienced a sharp rise in shares post Norsk Hydro’s announcement of production shut at the world’s biggest alumina refinery Alunorte.

Shares in Alumina Ltd rose as much as 11 percent on Thursday, October 4, while South 32 gained as much as 7.3 percent to hit a record high of $A4.25. Australian bauxite miner Metro Mining rallied 5 percent.

Aluminium producer Chalco in China is expected to be the main beneficiary of the Alunorte shutdown, said Citi in a note, as it maintained a “Buy” recommendation on the state-owned firm.

Shares of Nalco in India also reported a jump by 11 per cent on Wednesday, October 3, while Vedanta’s shares gained 3.2 per cent.

In the US trading on the same day, Alcoa shares rose 9.3 per cent to post its biggest percentage gain since April 2017. Shares of Century Aluminium, on the other hand, however, fell to its lowest to 17.2 per cent since January 2017.

Global miner Rio Tinto is also expected to be adversely affected by the announcement, UBS said.

“The outage means Rio Tinto is short alumina and will need to purchase in the spot market, which has negative impact on earnings,” the broker added.

Rio Tinto’s London shares dropped 0.5 percent on Thursday, while its Australian shares ended 0.5 percent higher, below a 1.2 percent rise in S&P/ASX 200 Resources index.

The company said in its most recent earnings report that the group was broadly balanced in alumina but exposed to long-term legacy alumina sales contracts.

“The significant escalation in the alumina index price during 2018 first half, as a result of industry supply disruptions ... considerably increased the financial impact of these legacy contracts,” Rio Tinto said further. It did not, however, immediately respond to request for comment.