Declining alumina prices hit US caustic soda market

At the start of 2015, those in the alumina industry had a right to feel like things were brightening for the lightweight metal in global markets. The global industry had been grinding its way through a years-built glut of supply that had depressed prices and forced alumina producers in the West to close dozens of operations. While the excess inventory was being worked down, prices had moved up. Demand for US caustic soda for alumina refining was brightening. But that was then.

Today, a surge in alumina production in China has surplus material sloshing through global markets, sinking prices and adding to the oversupply that has weighed on the market for the past several years. Prices for alumina are at six-year lows, down 26% from a year ago and alumina companies are smarting. Several have announced the shuttering of additional alumina smelters and refineries.

The stock for Alcoa Aluminum on Wednesday was at $8.19 in afternoon trading, half of the shares’ value in February. “If alumina production keeps shrinking, as pulp and paper (consumption) has, it’s going to leave the US long on (caustic soda) supply,” a US distributor of caustic soda said.

Just this week, the largest aluminium producer in Vedanta, India, said it cut production in half at its 1m tonnes/year alumina refinery in eastern India in the fourth quarter. The company cited falling prices, which are likely to continue trending lower in coming months, and a lack of readily available bauxite.