gladstoneobserver.com.au
Australia's leading economist Bill Evans predicts a tough future for aluminium
Edited by : AL CIRCLE
3 min read
One of Australia's leading economists says the nation's aluminium industry faces a tough fight for survival, but all hope is not lost.
Westpac chief economist Bill Evans stole the show at the Golding Industry Conference yesterday with a fascinating look at the global economy and what the future held for Australia's resources sector.
Mr Evans predicted the value of the Australian dollar would remain above US$1, which is the last thing aluminium producers wanted to hear.
"Then I guess people (in the aluminium industry) will have to do their sums on the assumption of the Aussie dollar staying up," he said.
"I would not want to have a long-term investment in an industry that required the Aussie dollar to average 80 US cents in the next three or four years."
The aluminium industry is historically a big employer in Gladstone, with two alumina refineries and an aluminium smelter providing thousands of jobs.
The combination of a high Australian dollar and low global prices for aluminium has hurt the industry.
In Gladstone, Boyne Smelter recently announced 90 redundancies and QAL announced on Wednesday it would also be cutting jobs.
The coal and iron ore stories have such a clear link with the China story, but with aluminium it isn't that clear a link.
Mr Evans was generally positive about the Australian resources sector, but he listed reasons why the Australian dollar would probably remain above US$1 for a long time, most notably that foreign markets were looking to invest in the "safe haven" provided by the Aussie economy.
Given his prediction the dollar would remain high, Mr Evans was asked what hope the aluminium sector had of surviving.
He said it would depend on the recovery of the price of aluminium.
While he predicted the price of other commodities, such as coal and iron ore, would rise because they were closely tied to the Chinese economy, Mr Evans said the price of aluminium was not as closely tied to China, so it might not get the same boost.
"(The global economy will be) flooded with this liquidity and if we see a better story for China next year, that could indeed take the aluminium prices (upward) as well," he said.
"(But) there are special issues with the aluminium story compared with the coal and iron ore story. The coal and iron ore stories have such a clear link with the China story, but with aluminium it isn't that clear a link."
"So it could be that the aluminium price doesn't get the benefit of that liquidity in the way coal and iron ore do."
Westpac chief economist Bill Evans stole the show at the Golding Industry Conference yesterday with a fascinating look at the global economy and what the future held for Australia's resources sector.
Mr Evans predicted the value of the Australian dollar would remain above US$1, which is the last thing aluminium producers wanted to hear.
"Then I guess people (in the aluminium industry) will have to do their sums on the assumption of the Aussie dollar staying up," he said.
"I would not want to have a long-term investment in an industry that required the Aussie dollar to average 80 US cents in the next three or four years."
The aluminium industry is historically a big employer in Gladstone, with two alumina refineries and an aluminium smelter providing thousands of jobs.
The combination of a high Australian dollar and low global prices for aluminium has hurt the industry.
In Gladstone, Boyne Smelter recently announced 90 redundancies and QAL announced on Wednesday it would also be cutting jobs.
The coal and iron ore stories have such a clear link with the China story, but with aluminium it isn't that clear a link.
Mr Evans was generally positive about the Australian resources sector, but he listed reasons why the Australian dollar would probably remain above US$1 for a long time, most notably that foreign markets were looking to invest in the "safe haven" provided by the Aussie economy.
Given his prediction the dollar would remain high, Mr Evans was asked what hope the aluminium sector had of surviving.
He said it would depend on the recovery of the price of aluminium.
While he predicted the price of other commodities, such as coal and iron ore, would rise because they were closely tied to the Chinese economy, Mr Evans said the price of aluminium was not as closely tied to China, so it might not get the same boost.
"(The global economy will be) flooded with this liquidity and if we see a better story for China next year, that could indeed take the aluminium prices (upward) as well," he said.
"(But) there are special issues with the aluminium story compared with the coal and iron ore story. The coal and iron ore stories have such a clear link with the China story, but with aluminium it isn't that clear a link."
"So it could be that the aluminium price doesn't get the benefit of that liquidity in the way coal and iron ore do."
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