Australia’s Alumina says rising costs, demand to underpin alumina prices

Australia’s Alumina says rising costs, demand to underpin alumina prices

Alumina Ltd said it expects long term alumina prices to be underpinned by rising capital costs for constructing new refineries, as well as growing demand and the availability of bauxite.

Chairman Don Morley told Alumina’s annual general meeting that construction costs for alumina refineries have increased substantially.

“For example, recent expansions of alumina refineries outside China have averaged in excess of 1,000 usd per annual tonne of capacity,” he said.

In order to achieve a reasonable return on these higher cost facilities, long term alumina prices will have to go up, he said.

Morley also noted that costlier energy will hike production costs for both refineries and aluminum smelters, of which energy comprises about 30 pct of their direct operating costs.

“These factors support our positive outlook for long term alumina and aluminum prices,” he said.

London Metal Exchange prices averaged 1.25 usd a pound in the first four months of 2007 after averaging 1.17 usd in 2006, underpinned by continuing strong demand for aluminum in China where demand for the metal has soared 110 pct since 2000.

Alumina has a 40 pct interest in the Alcoa Inc operated joint venture Alcoa World Alumina & Chemical (AWAC) which has a global network of eight alumina refineries and two aluminum smelters.

AWAC’s refineries, with annual alumina production capacity of over 15 mln metric tons, represent about 20 pct of global capacity.

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