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Alumina pressuring aluminium supply chain

Metal News - Published on Thu, 18 Oct 2018

Image Source: Reuters UK
Reuters reported that the alumina market is experiencing a year of unprecedented turbulence. Alumina, which sits in the aluminium production process between bauxite and refined metal, has historically been a highly efficient link in the supply chain. It hasn’t generated many headlines over the years because it has largely avoided any newsworthy disruption. It is, to quote Greg Wittbecker, analyst at the CRU research house, one of those markets “people have taken for granted”. Not any more. A series of supply hits have sent the alumina price on a rollercoaster ride this year, at one stage threatening the closure of several European aluminium smelters. This volatility poses some hard questions for aluminium producers, not least as to how alumina is priced.

Alumina’s year of turmoil began in February, when a Brazilian court ordered the part suspension of Hydro’s Alunorte refinery after heavy rains raised concerns about leakage from the plant’s tailings ponds. Alunorte, with capacity of 6.3mn tonnes a year, is the world’s largest single alumina production site and has been operating at half capacity ever since. Hydro threatened full closure of the plant on October 3 as the existing tailings area reached capacity, but it reversed the decision on October 8 after the authorities granted permission to use a new residues facility. Alunorte has reverted to half-capacity operation, as have the bauxite mines that feed it and the Albras aluminium smelter that takes some of its product.

The CME alumina price has whipsawed on the latest Alunorte developments, surging from $425 a tonne to $620 on the full-closure news before retreating back to $515 on confirmation it would resume 50% production.

The market’s Alunorte woes were compounded in April, when the United States slapped sanctions on Oleg Deripaska and his Rusal aluminium empire. That blew a hole in alumina’s complex supply chain, threatening the closure of Rusal’s Aughinish refinery, which in turn placed at risk the European smelters that rely on the Irish plant’s output. The sanctions deadline has been extended again to December 12 and the market’s assumption is that it is only a matter of time before they are lifted fully.

However, the fragility of the alumina supply chain has been brutally exposed, serving as wake-up call for the aluminium sector and the US and European governments, who received a short, sharp lesson in the multiple interdependencies of this previously uncontroversial commodity.

Source :

Posted By : Rabi Wangkhem on Thu, 18 Oct 2018
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