Alcoa-Alumina Venture Cuts Output Target on Slow Demand
Alumina Ltd. (AWC), partner in the world’s biggest producer of the material used to make aluminum, lowered the venture’s output target for this year, expecting slowing demand growth will keep prices “subdued.”
The venture between Alumina and Alcoa Inc. (AA) will produce 15.5 million metric tons of alumina this year, 3 percent lower than its February estimate and down from a record 15.7 million tons in 2011, Alumina Chief Executive Officer John Bevan told reporters after the annual shareholder meeting today in Melbourne. Aluminum demand will grow about 5 percent to 7 percent this year, slower than last year, he said.
United Co. Rusal, the world’s largest aluminum producer, said last month it’s looking at the possibility of closing smelters as prices decline. Alcoa, the largest U.S. aluminum producer, cut 12 percent of capacity in January and Chief Executive Officer Klaus Kleinfeld said April 11 the reductions “may not be the end.” Aluminum has fallen 25 percent in the past 12 months in London.
“It’s hard to see prices go up from current levels,” Bevan said. “The weakening in aluminum pricing is largely a reflection of slowing demand growth for the metal, in particular in Europe. This has led to curtailments at high-cost smelters, mainly in Europe.”
Indonesia’s plan to curb exports of unprocessed metal ores may not boost prices in the short term because the policy is unlikely to be immediately implemented on a large scale, Bevan said. In the long term, such restrictions may open up opportunities for the venture to start selling its bauxite overseas, he said.
Alumina shares ended unchanged at A$1.145 in Sydney trading today, while the benchmark S&P/ASX 200 Index rose 0.1 percent.
Alcoa in January announced the closure of plants in the U.S., Spain and Italy, cutting 531,000 tons of aluminum capacity. The company also said last month it will reduce output of alumina by 390,000 tons.
Alumina owns 40 percent of the Alcoa World Alumina & Chemical venture, while Alcoa holds the remaining stake. The venture produces about one-quarter of the world’s alumina, which is refined into aluminum. Alumina also controls 40 percent of the Point Henry aluminum smelter in the Australian state of Victoria.
Shutting the unprofitable Point Henry smelter is an option under review that’s due to be completed by the end of June, Bevan said today.
To contact the reporter on this story: Soraya Permatasari in Melbourne at email@example.com