Brazil faces the possibility of electricity rationing; aluminium production at risk

Brazil is staggering from the lack of rain in the country as it is drying up water sources and putting hydroelectricity generation at risk. Now with the growing risk of power rationing, the country’s current aluminium industry is destined to suffer even more.

Electricity is an absolute necessity for aluminium production, in fact, large amounts of it is required. The scarcity in electric power has already resulted in major production cutbacks in the country, leading them from being a key exporter to being an importer of the metal.

On Thursday, January 29, the premiums for P1020A to be delivered to São Paolo were $600-650 per ton.

Precipitation levels in the south-east region of the country are one-third of what it should be considering this is the middle of their rainy season. Reservoir levels have sunk critically with some at mere 5% capacity marking the worst draught in the country in 80 years.

Nearly 70% of the country’s electricity generation depends on this region. Even the buyers of the metal are not helping the situation since most say they have enough reserves of the metal to last a while, one buyer says he would not need supplies until March.

The spot billet market was seen to be unresponsive as most people are not inclined to buy the metal at the time despite repeated offers from traders. Some buyers are saying that they may think about buying metal again after the Carnaval.