Tue | Sep 19, 2017

Aluminium consultant says Alpart restart will add downward pressure on prices

Published:Wednesday | August 24, 2016 | 8:00 AM

Jamaican aluminium analyst Terece Muir, who currently works as a senior consultant at the London-based market analysis firm, CRU Analysis, is arguing that plans by Chinese firm Jiuquan Iron and Steel Company (JISCO) for the Alpart alumina refinery raise concerns about the impact that plant operations will have on the global price of alumina and aluminium.

"Near term, there is some concern that the restart of Alpart, as early as 2017, will raise the alumina surplus in the world excluding China, and add downward pressure to alumina spot prices," Muir said in an emailed response to The Gleaner.

After JISCO acquired Alpart from UC RUSAL, plans were announced for the firm's expansion of the plant and construction of a coal-powered aluminium smelter in Nain, St Elizabeth, where the plant is located.

 

Unable to meet needs

 

Muir, who started her career as a project engineer at Alpart, pointed out that if, in the near term, Alpart is operated at full capacity as it regards alumina production, it would still be unable to meet the needs of the 1.7 million tonnes of aluminium capacity of the smelters that JISCO already owns in China.

"JISCO is the fifth-largest aluminium producer in China. JISCO currently does not own any alumina-refining assets in China. The desire to back-integrate would be a driving force behind a purchase of alumina assets in the Atlantic, a market that is well supplied in alumina," she said in providing a rationale for the Chinese acquisition of Alpart.

Muir, however, argued that JISCO faces a risk in shipping alumina produced at Alpart to its smelters located in China.

"Intrinsic in the purchase of Alpart, an asset so far away from China's mainland, is the risk that rising freight and rising crude oil prices will raise delivered alumina costs," she said.

While declining to comment extensively on JISCO's plans to construct an aluminium smelter in Nain, Muir said those plans raise concerns given that JISCO already has smelters in China which are already producing at overcapacity.

"It is unclear whether or not they are going to start building the smelter now, from the reports that I have gotten so far. It's possible they can bring on stream the alumina refinery and have that running for a while before they choose to invest in a smelter ... but it's something to watch because sometimes you will see companies announce plans to start up and they may start one section and not follow through with the other part of the plan. But it depends on how the market recovers," she explained.

Addressing the overcapacity on aluminium world markets being fuelled by oversupply from Chinese producers such as JISCO, she said "there is a question mark as to whether or not they will build the aluminium smelter".

Said Muir: "I am personally rooting for it to happen. I want to see it happen for my country, but from an analyst point of view, does the market really need more aluminium capacity than what we are seeing in China right now?"

andre.poyser@gleanerjm.com