Alumina expects market to grow 12%

Alumina Ltd says that despite a 28 per cent jump in alumina prices over the past year, prices are still too low.

It also says the strong Australian dollar and higher energy prices are constraining the company's performance.

Chairman Don Morley said margins for the commodity were tighter than they should be and its price did not reflect the cost and economics of producing and selling it.

He said China had been able to expand alumina and aluminium production capacity to meet demand, which had limited price increases.

"This has limited aluminium price increases and meant that aluminium has underperformed relative to other commodities," Mr Morley told shareholders at Alumina's annual general meeting.

"Spot and index alumina prices have strengthened to around $US420 dollars per tonne and aluminium prices to over $US2,700 per tonne.

"However, the strength of the Australian dollar and higher energy prices remain a constraint on the company's financial performance."

Chief executive John Bevan told its shareholders that global demand for aluminium was expected to expand by 12 per cent this year because of China-fuelled growth.

The Melbourne-based company has a 40 per cent stake in Alcoa World Alumina and Chemicals (AWAC).

AWAC is world's largest alumina business, which has 17 per cent of global production, and is likely to post record production again in 2011, Alumina says.

It would be a second consecutive year of double-digit growth, Mr Bevan said.

"Growth outside of China is expected to be over 10 per cent.

"Demand from all sectors, with the exception of building and construction in the developed world, is strong, with vehicle production growing, and increased aluminium usage in most vehicles."

In China alone, 120 million vehicles are expected to be built over the next five years, he said.

AWAC bounced back last year to post a $US34.6 million ($A34.3 million) full year profit compared to a $US23.7 million loss in 2009.

Alumina prices shot up 28 per cent last year and AWAC's production by 12 per cent, due in part to China's insatiable demand for the commodity, the company said.

Mr Morley criticised the proposed carbon tax, pointing out that China's alumina and aluminium industries did not pay a similar tax and would shift production away from Australia if one was implemented here.

"In this global marketplace, a carbon price mechanism which increases the costs of producing alumina and aluminium in Australia will shift production and emissions from Australia to a country with a lower, or no, carbon cost," he said.

Shares in Alumina were up three cents at $2.29 at 1509 AEST as the broader market remained flat.