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New Alumina Index Pricing Winning Over Opponents-Aluminum Producers
Edited by : AL CIRCLE
2 min read
The new method for dictating how alumina contracts are priced is gaining traction, even among aluminum producers that previously opposed it, they told a conference Tuesday.
The world's largest aluminum producers, including U.S.-based Alcoa Inc. (AA) and London-listed Rio Tinto Alcan, a subsidiary of Rio Tinto PLC (RTP), have been strong proponents of the move to link pricing to costs.
Previously, alumina contracts were priced relative to the aluminum price on the London Metal Exchange.
"We're very pleased with how the pricing structure is maturing," said Alcoa's chief sustainability officer Kevin Anton, adding that there was ample transparency with the new indices that have been developed.
"The push to new pricing was due to cost input factors in making alumina, and there was a disconnect between the fundamentals in the market. Refineries had been lagging responding to demand, but now alumina is setting the price they can build new capacity. The new contract pricing method is very successful and we'll continue to see it mature," he said.
Alcoa is the world's largest third-party seller of alumina.
Alumina, the raw material used to make aluminum, was previously priced as a percentage of the LME price, usually between 11% and 14%. A move to an index-based system was seen previously in the iron ore sector after strong backing from key suppliers to China's stainless steel sector, BHP Billiton PLC (BHP) and Rio Tinto.
The world's largest aluminum producers, including U.S.-based Alcoa Inc. (AA) and London-listed Rio Tinto Alcan, a subsidiary of Rio Tinto PLC (RTP), have been strong proponents of the move to link pricing to costs.
Previously, alumina contracts were priced relative to the aluminum price on the London Metal Exchange.
"We're very pleased with how the pricing structure is maturing," said Alcoa's chief sustainability officer Kevin Anton, adding that there was ample transparency with the new indices that have been developed.
"The push to new pricing was due to cost input factors in making alumina, and there was a disconnect between the fundamentals in the market. Refineries had been lagging responding to demand, but now alumina is setting the price they can build new capacity. The new contract pricing method is very successful and we'll continue to see it mature," he said.
Alcoa is the world's largest third-party seller of alumina.
Alumina, the raw material used to make aluminum, was previously priced as a percentage of the LME price, usually between 11% and 14%. A move to an index-based system was seen previously in the iron ore sector after strong backing from key suppliers to China's stainless steel sector, BHP Billiton PLC (BHP) and Rio Tinto.
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