Alcoa adds shine to Aluminium: Alumina (AWC) $1.90

ALUMINIUM'S reputation as the Cinderella metal has been challenged after global giant Alcoa's better than expected third-quarter profits overnight, partly driven by improved demand. Alcoa made $US39 million ($A43m) compared with a $US256 million loss in the previous corresponding quarter, with most analysts expecting the company to remain mired in red ink. Alumina and Alcoa are partners in Alcoa Worldwide Alumina and Chemicals (AWAC). Alumina has a passive 40 per cent of the upstream joint venture, which accounts for 17 per cent of global production. The most pertinent aspect for Alumina was the $US65 million result from Aloca's alumina division, up $US72 million on the second quarter. Pricing on third-party sales improved 13 per cent. Alcoa's heavies are forecasting second half (December) aluminium demand to grow 11 per cent, which compares with the full-year decline of 6 per cent. The inventory position is moving into balance, with a forecast western world deficit of 450,000 tonnes offsetting a Chinese surplus of 700,000t. Criterion in late July suggested Alumina take partial profits at $1.74 a share, arguing the share price had had a fair trot since the May capital raising at $1 a pop. But the favourable trends alluded to at the time -- firming demand coupled with easing prices for caustic soda, a key input -- remain intact. While Cinderella is close to finding her custom-moulded footwear, there are still obstacles in the way of the pumpkin coach. One is surging energy costs. In a statement this morning, Alumina CEO John Bevan also noted “early improvements in demand and prices for alumina in the third quarter as the alumina market moves towards balance.'' He also said commissioning of AWAC's Brazilian growth projects -- the Juruti mine and the Sao Luis refinery -- were on target “and are expected to improve AWAC's average cash-cost position''. The aluminium price has recovered 19 per cent this year, compared with copper's 100 per cent surge and zinc's 60 per cent gain. Criterion's Alumina call is under review. Other aluminium exposed stocks are Rio Tinto (RIO) and CSR (CSR), which owns 25 per cent of the Tomago smelter near Newcastle.