Alcoa expects higher aluminum prices, shorter alumina supply on Russia sanctions: exec

Friday, Mar 04, 2022

   The aluminum market will likely see elevated prices and tighter alumina supply as a result of ongoing international sanctions placed on Russia after its military invasion of Ukraine, an Alcoa executive said Feb. 28.

  "It's a very fluid situation ... it will really depend on how long this drags out and how long the sanctions are in place," CFO William Oplinger said during a presentation at the Deutsche Bank Global ESG Conference.
  Oplinger said Russian aluminum producers may not be able to fill the incremental market needs in Europe and the US, which will keep "upward pressure" on the recent high level of premiums in both regions.
  The Platts spot 99.7% P1020 US aluminum Transaction premium delivered Midwest held at a record 37.75 cents/lb Feb. 25. Market participants said the next target for premiums was 40 cents or higher, as there were fears that there could be sanctions on Russian metal and disruptions to energy supplies needed to produce the metal.
  Meanwhile, the Platts daily European duty-paid aluminum premium remained flat Feb. 25 at a record $450-$490/mt, in-warehouse Rotterdam.
  Oplinger said sanctions could also squeeze an already-short global alumina market if Russian aluminum producers shut down refineries or face challenges sourcing bauxite.
  "They may have to source some of the bauxite that they are getting out of Brazil from Guinea or from Africa instead," he said. "On the alumina side, it will all depend on what is going on with Nikolaev and Aughinish [alumina refineries]."
  Russian integrated aluminum producer Rusal operates the 1.7 million mt/year Nikolaev refinery in Ukraine and 2 million mt/year Aughinish refinery in Ireland
  Rusal said it halted shipments from Nikolaev Feb. 28 due to logistical challenges linked to events in the country.
  No further smelter restarts announced
  Beyond plans to restart capacity in Brazil, Oplinger said Alcoa has not committed any plans for further aluminum smelter restarts amid a bullish market that saw prices surge in 2021.
  "At this point, we've not announced any incremental restarts other than what's going on down in Alumar [aluminum smelter in Brazil]," he said. "That is the restart that we're focused on making sure is safe and financially successful."
  US-based Alcoa said in 2021 it would restart 268,000 mt/year of aluminum capacity at Alumar that has been curtailed since 2025. Initial production will begin in the second quarter of this year, with full ramp-up expected in the fourth quarter.
  By 2024, the Alumar smelter will be powered with 100% renewable energy, according to the aluminum producer.
  In the US, Oplinger said Alcoa still has two curtailed lines at its 269,000 mt/year Warrick smelter in Indiana, and its 279,000 mt/year Intalco smelter in Ferndale, Washington, remains fully curtailed.
  However, a $10 million funding package was recently introduced in the Washington [state] House of Representatives and Senate to "make green renovations to the aluminum smelter in Ferndale."
  "This investment will get us one step closer to reopening the facility, restarting jobs, and hopefully, ending up with some of the greenest aluminum production in the world," Washington State Representative Alicia Rule said in a Feb. 23 statement.

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