Aluminium Prices Surge
Sydney Morning Herald
Friday July 9, 1999
Aluminium prices surged to 10-month highs, after an explosion cut alumina output at a major Kaiser Aluminum refinery in the US, sending share prices of local producers WMC, Comalco and Capral sharply higher.
WMC, which produces about 30 per cent of the world's alumina from its joint venture with Alcoa in Western Australia, hit near two-year highs as expectations rose that Kaiser would attempt to fill its long-term contracts with alternative supplies.
Alumina is the intermediary product between bauxite and the finished product aluminium. Any pressure on alumina supplies forces prices higher - with the immediate beneficiaries Comalco and WMC - which then rolls through to higher costs for producers of the end product, aluminium.
Rumours that Kaiser's refinery in Louisiana would not open again - given its high operating costs and the severity of the damage - helped lift aluminium prices by 2.2 per cent in London on Wednesday.
Three month aluminium on the London Metal Exchange rose $US30.99 a tonne to its highest point since September at $US1419.50 a tonne.
Kaiser announced on Wednesday that operations at its Gramercy alumina refinery would be halted for several months following the explosion which injured 24 workers.
The Houston-based aluminium company, the third largest in the US, has declared force majeure on its contracts.
Annual world supply of alumina is 18 million tonnes, of which WMC's share of production is about 2.5 million tonnes.
Shares in integrated aluminium producer Comalco rose 17c, or 2.4 per cent, to $7.25 while Capral shares also gained, rising 10c to $2.32.
Stockbroking analysts are betting that Comalco this month will announce formal plans to build its Comalco Alumina Project (CAP) at Gladstone in Queensland, a project for which the Federal Government has already allocated $100 million in infrastructure assistance.
WMC shares soared 33c, or nearly 5 per cent, to $7.37, also helped by stronger copper prices.
Unexpected news earlier this week that Asarco was cutting its copper output by 20,000 tonnes was another positive fillip.
© 1999 Sydney Morning Herald
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