Hi Debbie,
The Alumina price has gone vertical – setting record highs. Alumina is now trading at 35% of the aluminium price. Back in the days when alumina was priced off aluminium, the rule of thumb was that alumina traded at 12-15% of the aluminium price. That’s now out the window!
In a normal world, the surge in the alumina price would see Chinese alumina refineries ramp up production and export into the high seaborne price. This would normally result in the alumina price pretty quickly retreating to US$350-400/t. That’s not happening this time for one key reason – Chinese doesn’t have enough bauxite. Guinea is constrained, Indonesia is holding firm on its export bans, Chinese domestic supply is dwindling and being constrained by safety and environmental audits and there is no spare capacity in Australia. So it looks like we could be in for a period of elevated prices until the situation in Guinea resolves, or new capacity in Guinea comes on line later next year.
- We know the stocks run hard of late but it looks good and we still believe the next 10% move will be on the upside.