South32 reports record breaking prices for South African aluminium

South32 claimed record aluminium pricing for metal produced by Hillside, its South African smelter, but struggled to clear a backlog of metal due to port congestion in both South Africa and Mozambique, where it has a smelter.

The company said it was working on alternate strategies to mitigate a capital increase as a result of larger inventories in a second quarter production report released today.

“Third party port performance at Richards Bay and ongoing congestion in global shipping conditions” said South32

It also cited chain supply issues at its global operations as a result of Covid-19.

South32 said it took advantage of "different discharge and cargo transportation possibilities" to profit from high aluminium prices.

 “We expect the current working capital build to unwind once we realise the full benefit of our initiatives, and port congestion and general freight tightness is alleviated,” added South32.

For metal produced at Hillside, the average price per tonne was $2,952. On the negative side, power rates contributed to inflation, resulting in a 10% rise in operational costs for the half year ending December 31, according to the company.

In a research dated January 20, Goldman Sachs predicted that the aluminium market will enter "a multi-year bull market" since supply would be restricted due to the carbon-intensive procedures used in its manufacturing. As a result, output would be subject to restriction, perhaps resulting in supply constraints.

Hillside produced 1% less aluminium in the second quarter, according to South32, but its full-year output target of 720,000 tonnes remained intact. Mozal's production was on track to reach its yearly target of 273,000 tonnes, with a realised aluminium price of $3,041/t for its product.

South32's manganese operations in South Africa produced 2.2 million tonnes (Mt) for the whole year, although they recorded a 7% rise in output to 1.16Mt and a 12 percent increase in ore sales in the second quarter, as well as a 9% increase for the half-year.

The rise in sales was due to a reduction in inventories. South32 avoided restricted rail capacity on South Africa's network by transporting by road, as it has done in previous reporting periods.

It also improved the sales mix, achieving a volume weighted premium of 11% above the medium grade 37 percent manganese lump ore index.

Vandalism and theft on the train lines controlled by Transnet, the government-owned freight and logistics firm, have made it difficult for South Africa's mining sector to carry export quantities to the country's ports.