Alumina prices surge as supplies shrink

Spot prices of alumina have been soaring over the past few months on the back of shrinking global supplies. Spot alumina prices, currently pegged at $620-630 a tonne, are about 38 per cent higher on a y-o-y basis, according to analysts.

The spike is being attributed to a supply deficit of the commodity, which was pegged at 1,300,000 tonne in CY05 compared with 300, 000 tonne in CY04, say analysts.

It is understood that Chinese importers have also bought alumina in small quantities at about $ 690 a tonne, say analysts. Spot alumina prices were quoted at $ 590-600 a tonne at the end of January 2006. Among domestic players, one of the biggest beneficiaries of rising spot prices of alumina is National Aluminium (Nalco).

Alumina, typically accounts for 40-45 per cent of the total cost of production for unintegrated aluminium smelters across the globe, say analysts. The rising prices of alumina has resulted in aluminium prices going up on the LME, over the past few months.

Analysts estimate that in the March 2006 quarter, Nalco has sold 120,000 tonne of alumina on spot basis.

It is understood that the company had earlier fixed the contract prices for alumina at $375 per tonne. Domestic aluminium players such as Nalco and Hindalco are not affected by rising alumina prices, given their captive supplies of this key input.

However, alumina prices are not expected to remain strong in the latter half of CY 2006, say analysts.

That's because large players such as China Aluminium Company are expected to complete expansion of their alumina projects. As a result, the global supply deficit is expected to shrink to 400,000 tonne in CY06, say analysts.