Benchmark aluminum reached a one-week high on the London Metal Exchange (LME) March 27, closing 1.3 percent higher at $1,911 per metric ton after touching $1,919.50. The increase came as LME inventories fell and Norsk Hydro’s Brazil alumina operations made another step toward full production, Reuters reports.
According to the article, Hydro has agreed with the Brazilian government to have a third-party perform a technical assessment on two clearances that, if confirmed, could lead to a full ramp-up in output at the company’s Alunorte refinery, which has been operating at half capacity since early 2018.
Uncertainty surrounding the plant’s approval to ramp up is supporting prices, Carsten Menke, an analyst with Zurich-based bank Julius Baer, told Reuters.
Brazil is being cautious about the approval because of the January collapse of a dam containing mining waste at Vale’s Córrego do Feij?o mining complex, which killed more than 100 people and forced many others out of their homes.
This past weekend, authorities warned communities in the southeastern state of Minas Gerais to evacuate after independent auditors found that one of Vale’s tailings dams in that area could collapse.
Hydro’s Alunorte can produce 10 percent of the world’s alumina capacity outside China when operating at full capacity, Reuters notes.
A senior merchant trader told the news agency that the alumina market “is still very tight in the near term,” adding that even if the company gets the approval to ramp up production, nothing will change “for the next three months.”
“The aluminum market, in contrast to expectations about six months ago, is not tight at all,” Menke told Reuters. He pointed to “constant high exports from China” resulting from “sufficient supplies but also weak demand driven by weakness in the car sector in China.”
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