Aluminium price jumps as Norsk Hydro shuts Brazilian refinery
Norsk Hydro
kr3,267,265.00
19:00 21/12/20
Norsk Hydro has announced that the world’s largest alumina refinery is to temporarily close, heaping pressure on both the Norwegian company’s shares and the price of aluminium, albeit in opposite directions.
The Alunorte refinery in Brazil had been running at 50% production since March because of embargoes placed on the plant by the Brazilian authorities, who are investigating claims that water supplies were contaminated following a period of extreme rainfall in February.
But Norsk Hydro announced Wednesday it was now shutting down production entirely, because it was unable to use a new deposit area or filters due to the court orders.
The announcement sent shares in Oslo-listed Norsk Hydro down 13%, to a 21-month low, while the three-month price of aluminium on the LME surged 3%, hitting an intraday high of $2,181 per tonne, its highest since June.
Alumina, a refined powdery material, is a key ingredient in the production of aluminium. In 2017, Alunorte produced 6.4m tonnes of alumina, enough to make 3m tonnes of aluminium.
Hydro Norsk said the shutdown of Alunorte and the accompanying Paragominas bauxite mine were temporary, although it did not say when it would reopen.
John Thuestad, executive vice president of Hydro’s bauxite and alumina division, said: "This is a sad day because we have the world’s most advanced technologies available to continue safe operations, which we are prevented to use, and this will impact jobs, communities, suppliers and customers.
"We will continue to work constructively with the authorities to life the embargo and to resume operations."
Ross Strachan, senior commodities economist at Capital Economics, said: "This supply shock will clearly lead to less supply than we expected, at least for a brief period, and accordingly we are revising our end-2018 price forecast for alumina from $400 to $450 per tonne."
The price of alumina reached a record high of $650 a tonne in early September before returning to around current levels of $460 tonne.
Long-term, however, Strachan said he still expected supply to quickly improve once the dispute was settled and he left his long-term forecast - of $350 per tonne for end-2019 – unchanged.