Chinese environmental crackdown boosts Alcoa’s profit

 

　　AWAC, a 60-40 partnership between Alcoa and Alumina, saw its net profit rocket in calendar 2017 to $US901 million from $US39 million a year earlier.

 

　　The result led Alumina to increase its final dividend by 200 per cent.

 

　　Alumina said the price margin for AWAC’s alumina refineries increased by $US86 per tonne to $US137 a tonne. Net cash inflows jumped from $US653 million to $US1.04 billion.

 

　　AWAC mines bauxite at its Huntly and Willowdale mines in the Darling Range and refines alumina at Kwinana, Pinjarra and Wagerup. It also holds 55 per cent of an aluminium smelter in Victoria and has a mine and refinery in Brazil..

 

　　Alumina chief executive Mike Ferraro said alumina prices strengthened last year because of growth in demand, tightness in the Atlantic market and the Chinese measures.

 

　　“AWAC managed its costs well despite pressure from higher raw material costs and a weaker US dollar,” Mr Ferraro said.

 

　　He said alumina demand rose 7.7 per cent last year and the global market was expected to be balanced in 2018.

 

　　The average realised alumina price in 2017 soared 38 per cent to $US335 per tonne.

 

　　The Chinese Government imposed tough restrictions on heavy industry, including aluminium and alumina plants, to cut pollution during the Northern Hemisphere winter.

 

　　“China began significant structural and environmental reforms of the aluminium industry in 2017 and we expect these reforms to continue, which should reduce excess smelting and refining capacity there,” Mr Ferraro said.

 

　　However, Platts reported this month that spot alumina prices had fallen to a six-month low amid weak demand and rising supply. It said China had not been buying because of lower domestic prices.

 

　　The AWAC performance delivered a stellar result for Alumina, which reported a $US340 million net profit, compared with a $30 million loss in 2016.

 

　　“The improvements in AWAC distributions has continued into early 2018 which has allowed the company to declare a final dividend 200 per cent higher than last year,” Mr Ferraro said.

 

　　The dividend rose from US3.1? to US9.3?.

 

　　Alumina said AWAC-operated mines increased annual production by 3.5 per cent to hit a record level of 38.8 million dry tonnes.

 

　　“The growth in production was facilitated by creep at the Huntly and Willowdale mine and the near-completed capacity increase of the Juruti mine (in Brazil) to 5.7 million BDT.”

 

　　Production at AWAC-operated refineries and shipments of alumina slipped because of the 2016 closure of a US refinery.