Temporary capacity cut at Hydro's Alunorte refinery not likely to drive alumina prices higher

The benchmark alumina price according to Fastmarkets MB alumina index fob Australia will remain steady around US$280 per tonne at the end of the week despite Hydro’s announcement on Thursday December 19 about 50-70% production cut at its Alunorte alumina refinery for a temporary period. 

Australian Alumina FOB Price, according to Shanghai Metals Market stands unchanged at US$ 278.50 per tonne. The highest in the year was US$ 422 per tonne in April and it has been constantly falling due to an oversupplied market. Average imported alumina price in China also stands unchanged at US$356 per tonne. Imported alumina prices are constantly on a downward curve and stood at US$363 per tonne in the beginning of December.

Hydro cut production at its Brazil Alunorte refinery on Thursday after power cut to the producer’s bauxite mine in Paragominas, Brazil due to a fallen transmission tower. However, with the present oversupplied alumina market and slow demand from the smelters, the capacity cut is not likely to impact prices significantly.

Alumina prices skyrocketed to all-time highs of US$707.75 per tonne in April 2018 when the same refinery was ordered to cut operations to 50% of its annual capacity because of a leak in its bauxite residue pond. The refinery received approval in May 2019 to resume normal output after a court lifted the second of two embargoes that squeezed production by half for more than a year.

Market sources are of the view that the current much shorter curtailment will not drive alumina prices higher.

“Alumina prices remain very stagnant at the moment, we have been between US$275-280 per tonne for quite a while and I don’t think anything will change until the New Year – this news hasn’t even stoked slight bullishness,” a trader said.

Analysts have already projected a surplus global alumina market in 2019 in the range of 200 thousand tonnes to 1 million tonnes.