Alumina upbeat as Alcoa cuts jobs

Australia’s Alumina is confident recent moves to restructure its business will pay off in the near term, after the price of its alumina rallied in the wake of its cost-cutting program. But the group’s joint venture partner, US aluminium giant Alcoa, isn’t as upbeat about the state of the industry and has flagged a large number of job cuts.

Alumina’s business is a 40 per cent stake in the Alcoa-managed AWAC alumina alliance.

Alumina (AWC) chief executive Peter Wasow, commenting after the release of US-based Alcoa’s quarterly earnings release, said lower alumina prices had negatively impacted profit margins over the first quarter.

Aluminium prices had fallen heavily in last half of 2015, taking prices for the intermediate alumina product down in the process.

AWAC’s production of alumina was 3.2 million tonnes for the quarter, the company said, reflecting the impact of announced curtailments. Alumina received $49.4 million of dividends, distributions and capital returns from AWAC in the quarter, leaving the company with a net debt of around $US110m at the end of March. But Mr Wasow said the company’s recent efforts at stripping out costs should pay off, considering a strong recovery in the price of alumina recently.

“Due to the portfolio restructuring that has been underway for some time and also to continued efforts at cost reduction, we have been able to generate positive margins even at these very low prices,” Mr Wasow said. “Since January, prices have improved by around 28 per cent, which is expected to support second quarter margins.” But news from the parent company Alcoa was not so upbeat.

Alcoa reported a steep drop in first-quarter earnings on tumbling aluminium prices. Results were hit by a 40 per cent drop in alumina prices and a 26 per cent decline in aluminium prices. Prices of industrial commodities have been in retreat due to slowing demand from China and other emerging economies. Those effects were partly countered by $364 million in cost cuts. Alcoa also continued to curtail low-efficiency industrial operations, including shutting down a smelter in Indiana and curtailing some refining capacity in Texas.

Alcoa said it had already cut 400 jobs and settled on plans to eliminate another 600. Alcoa is also “evaluating another reduction of up to 1,000 positions,” citing tough market conditions.