ATHENS--The global alumina market may reach a surplus of 1 million metric tons a year in 2007, Jacynthe Cote, president and chief executive of Alcan Inc. (AL) bauxite and alumina, said Tuesday.
The alumina market will be in balance within two to three years at best, she added, but then will require two medium-to-large-scale refineries a year to meet growing demand.
Cote told Metal Bulletin's 13th bauxite and alumina conference in Athens Tuesday that a surplus situation is heavily dependent on a certain amount of Chinese production as well as stability of global output.
Cote noted that the speed with which China brought new alumina capacity on-stream in 2006 took market participants by surprise, and said alumina market forecasts are reliant on the country continuing to expand as it has said it will.
Stability in regions such as Guinea, the world's largest bauxite exporter, which was put under martial law last month, is key to the alumina market balance.
Four tons of bauxite make two tons of alumina, which in turn is smelted to produce one ton of aluminum.
Cote also pointed to refinery utilization rates, which have been running at over 95% for some time in order to meet demand and were cranked up even more in 2006 to take advantage of high prices. Some refineries may have "maintenance issues" as a result, Cote added.
China will account for around 60% of the increased demand and supply of alumina by 2011, Cote said, and is expected to bring 30 medium- to large-scale alumina refineries on stream by then.
Around two thirds of this new alumina capacity will be based on domestic bauxite supplies, with the remainder imported, Cote said.
But given the lower quality of China's bauxite reserves, Cote said this will result in higher production costs because the ore will need more caustic soda and energy to process it. This means there's currently no strong business case to export bauxite from China, she said.
China will be among the top three bauxite producers by 2011, along with Latin America and Australia. This is a big step change from 2005, when the country produced just 8 million tons, Cote said.
Alcan has the capacity to produce over 16 million tons a year of bauxite and is a net seller of the ore, Cote said. Once expansions at two of its alumina refineries, Gove in Australia and Alumar in Brazil, Alcan will have a production capacity of 7.3 million tons of alumina a year.
These expansions will be key to bringing 50% of Alcan's production into the lowest part of the cost curve and 75% in the lowest half, Cote said. They'll also balance supplies to Alcan's smelters, she said.
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