Alumina Spot Prices to Fall Further

Executive Summary

1. Alumina prices have plummeted to a 22-month low of $338 per mton on multiple bearish factors. Australia alumina spot prices have continued to decline on a well-supplied market, falling production costs, and lower LME aluminum prices.

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2. Indeed, the Brazilian Federal Court lifted the alumina production embargo against Alunorte. Since Alunorte restart was confirmed on May 20th, Australia alumina spot prices have fallen by 10%. According to Hydro, Alunorte will reach 75%-80% of capacity within two months. The refinery was running at half capacity since March 2018 after it was ordered by Brazilian environmental authorities to curtail production on concerns of a leak from bauxite residue deposits. Alunorte can produce around 6.4 million mton of alumina per year.

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3. Alumina spot prices are expected to fall to as low as $270 per mton at some point in the next 12 months as the market experiences a growing surplus. With the confirmed restart of the Alunorte refinery in Brazil and production expansions in China and the Middle East, the world's alumina market is expected to switch to a surplus of 2.8 million mton in 2019, from a deficit of 0.4 in 2018. In fact, market sources are already reporting unplaced alumina cargoes and buyers staying on the sidelines waiting for lower prices.

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