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Regional premiums may take hit: Côté

Keywords: Tags  Rio Tinto Alcan, Jacynthe Côté, London Metal Exchange, regional premiums, aluminum, alumina, rule changes, Shivani Singh

SINGAPORE — The London Metal Exchange’s rule changes could bring regional premiums down to historic lows and increase pressure on smelters, according to Rio Tinto Alcan Inc. chief executive officer Jacynthe Côté.

The Montreal-based mining company has closed or curtailed 600,000 tonnes of aluminum capacity since 2009, and its latest suspension of the Gove refinery in Australia will remove 2.6 million tonnes of alumina, she said Dec. 3.

The aluminum market is in a modest deficit, but expansions in China could reverse the trend, Rio Tinto Alcan said, adding that aluminum inventories are expected to remain high as financial deals stay attractive.

Rio Tinto Alcan has no significant new investments in alumina or aluminum for the foreseeable future, given challenging market conditions, Côté said.

The alumina market is expected to be near balanced in 2014, the company said, adding that it was trading at around the marginal cost of production.

Rio Tinto Alcan remains slightly long in alumina, and said strong Chinese demand for bauxite and Indonesian supply risk continue to provide upward price pressure.

"Continued strong demand was due to declining Chinese domestic reserves and grades," it said, adding that the company was well placed to benefit from the increased demand for bauxite from China and the Middle East.

Rio Tinto Alcan, which has interests in three of the four largest bauxite mines in the world, said it sees potential expansion opportunities in Australia, Guinea, Brazil and other locations.

Rio Tinto Alcan generates 62 percent of its own power requirements compared with an industry average of 38 percent, it said.

The company’s modernization of its smelter in Kitimat, British Columbia, is on track for start-up by end of 2014, the company said, adding that its Yarwun 2 refinery in Australia is near completion and will deliver reduced operating costs.

A version of this article was first published in AMM sister publication Metal Bulletin.

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