Australian producers of alumina, South 32 (S32) and Alumina Ltd (AWC) , both said on Thursday they expect high prices for the aluminium raw material to stretch into next year based on a shortfall in global supply.
A buoyant cycle for alumina is expected to continue given an outage at the Alunorte plant in Brazil, production cuts in China over the coming winter, and prospects that global aluminium maker UC Rusal 0486.HK may not escape sanctions this year.
Alumina Ltd is a stakeholder in miner and aluminium producer Alcoa World Alumina and Chemicals (AWAC), which is 40 percent owned by itself and 60 percent by Alcoa AA.N .
In Alumina Ltd's annual profit report on Thursday, CEO Mike Ferrar said AWAC's alumina margins had hit levels not achieved since before the 2008-2009 financial crisis.
"A tight Western world alumina market, and structural and environmental reforms in China produced significant price tailwinds for AWAC," he said.
"Current market conditions are broadly expected to continue into the second half with the Alunorte refinery in Brazil still running below full capacity and Chinese winter production cuts expected to commence later in the half."
Norsk Hydro NHY.OL was ordered by Brazilian regulators in February to slash output from Alunorte, the world's biggest alumina refinery, after Hydro admitted to emissions of untreated water during severe rains that month.
The company, however, has also denied many of the allegations against it.
Alumina prices AALc1 surged to a record above $800 a tonne in May before falling back to $450 in late June and climbing again to $550 a tonne on Thursday.
Hydro said late last month the timing for resuming full output at Alunorte remained uncertain, with the possibility it could be between October and the middle of next year.
A Hydro spokesman said on Thursday it had no estimate for when the closed part of Alunorte could restart, because it depended on approval from the authorities in Brazil.
"It certainly feels like their initial ramp-up at the end of this calendar year is not going to be achieved and is pushing out to next year," South 32 Chief Executive Graeme Kerr told reporters on a briefing call.
Alumina "prices at $550 a tonne are well supported by tight supply and we think there is further upside from trade sanctions and China policies," Kerr said.
China's aluminium output is expected to be curtailed over winter as part of its crackdown on pollution. Also, Rusal expects to halt some of its production as soon as next month if sanctions against it are not lifted.
Adding to tightness, a strike at Alcoa's AA.N operations in Western Australia continues after an Aug. 8 walkout. Alcoa has said it doesn't expect any impact to output at the refineries, which account for around 8 percent of global alumina.
