Aluminium

[Smurf1976]

it's actually scary as there is one thing you can not do with smelters is shutting power..and end up with a jack hamer trying to cut thru a big blob of solidified metal..
Did we not experience that in SA.

In brief:

31 January 2020 a major incident occurred involving structural collapse of 6 transmission towers in Victoria, carrying 2 x 500kV transmission lines. A seventh tower was also severely damaged.

That incident involved the towers physically crashing to the ground in real time, a completely unintended and unexpected occurrence, and disconnected western Victoria (including the Portland aluminium smelter) from the rest of the grid.

A solution making use of physically still intact assets was very hastily devised and actioned with supply restoration to the smelter underway 2 hours and 40 minutes after the incident. In short this involved isolation of the damaged lines and connecting western Victoria including the smelter to SA.

Another hour or so and it would all have been over since 3.5 - 4 hours is when the cryolite, which melts at just over 1000 degrees C, starts to freeze. Cryolite being a molten material that overlays the aluminium in the smelter pots with the great problem being that once it sets, once it's solid which it is below about 1000 degrees, then it ceases to conduct electricity. Or in simpler terms once it's set there's no way to put heat into the pots to re-melt it = game over.

The improvised solution remained in place, and the smelter operated at full production, whilst towers were installed and lines returned to operation in Victoria.

The same smelter was however far less lucky in 2016 when a major power failure did indeed lead to not all but a lot of the pots solidifying. I don't know what the total cost of the repair was but government chipped in $240 million and that certainly wasn't the full cost.

Any aluminium smelter anywhere in the world uses the same basic process. Take the power out and they're all in the same situation - once the cryolite sets it's very serious time and $ to get going again. To the point that demolition and rebuilding can actually be the cheapest option.

 

[Ann]

Any aluminium smelter anywhere in the world uses the same basic process. Take the power out and they're all in the same situation - once the cryolite sets it's very serious time and $ to get going again. To the point that demolition and rebuilding can actually be the cheapest option.

Again, I am just blown away by your knowledge Smurf. That's good enough for me, I am out of AWC as soon as I can sell in the green.

 

[sptrawler]

Again, I am just blown away by your knowledge Smurf. That's good enough for me, I am out of AWC as soon as I can sell in the green.

Anne I'm not sure AWC actually are involved in the aluminium smelting part of the process, from memory Alcoa is the one who smelts the aluminium, then Alcoa pay a dividend to AWC as they are basically a major shareholder. I think that's how it works.

From memory what AWC is involved in is the mining and processing of bauxite to alumina, this is then further processed to aluminium in the final stage, which I think is what @Smurf1976 was talking about.

Well that is my understanding, I have had AWC a few times, buy in at about $1.50 sell out anywhere above $2.
I don't have any ATM, but I guess I'm saying be sure you're making a decision on the right inputs and assumptions, by the way love your posts.

 

[Smurf1976]

From memory what AWC is involved in is the mining and processing of bauxite to alumina, this is then further processed to aluminium in the final stage, which I think is what @Smurf1976 was talking about.

Basic process is:

1. Mining

2. Refine the ore to alumina (Al2O3)

3. Smelting to break the oxygen bond and turn alumina into pure aluminium

4. Processing of aluminium to other products - alloys, rolled sheet, powder, etc.

My previous process relates to step 3 only which, in the Australian context, is carried out at 4 plants one each in Qld, NSW, Vic and Tas.

Step 2, alumina, is carried out at various facilities in Qld and WA.

Step 1, mining, in Qld, NT, WA and on a small scale in Tas.

Regarding smelting, step 3, the key practical and economic attribute of it is the need for truly incredible amounts of electricity. If you don't have that then you're stuffed both economically and practically.

For the alumina refining stage, step 2, what's needed is heat so that means fuel. Usually but not always the fuel of choice is natural gas.

From an economic perspective aluminium smelters and alumina refineries thus tend to be located where they can obtain cheap and reliable electricity (smelters) and fuel (alumina refineries). The benefits of that outweigh the cost of shipping things around assuming it's a reasonably accessible location.

From an investment perspective I'm not advocating for or against. I wouldn't avoid the sector due to the risk of energy disruption to a smelter however provided that the company in question isn't hugely exposed to any one facility. For example Rio Tinto's business is very much larger than any of their aluminium smelters, an incident there wouldn't kill the company. Obviously very different if we're talking about some company whose entire business is a single aluminium smelter and there's only one transmission line feeding it (which would be shockingly bad engineering but someone somewhere may well have done it).

 

[Smurf1976]

I am just blown away by your knowledge Smurf.

Plenty of things I know nothing about....

 

[Ann]

Well that is my understanding, I have had AWC a few times, buy in at about $1.50 sell out anywhere above $2.

I feel with the need for lighter weight metals for EVs and solar panel framework and a host of other things Aluminium is good for, it should come into its own. Chart wise it has been in an oscillation pattern for years since it hit the deck in 2008. Surely it is time the thing tried to get back to its levels prior to the GFC. The price of aluminium has been rising for a while now.

From an investment perspective I'm not advocating for or against. I wouldn't avoid the sector due to the risk of energy disruption to a smelter however provided that the company in question isn't hugely exposed to any one facility.

OK, I am now thinking it may be reasonable to hang on after what you said. That was all really clearly laid out as always which is a blessed relief for a dyslexic! I always worry about sudden unforeseen shocks which will not be reflected in a chart. An unforeseen power outage will never make its way through inside knowledge onto a chart. Usually, I can see when the SHF situation is percolating by chart movements.

From an economic perspective aluminium smelters and alumina refineries thus tend to be located where they can obtain cheap and reliable electricity (smelters) and fuel (alumina refineries). The benefits of that outweigh the cost of shipping things around assuming it's a reasonably accessible location.

Sounds like they might benefit from a mini self-owned nuclear reactor when the powers that be put a blessing on such things.

Plenty of things I know nothing about....

Until it tweaks your interest, I am guessing?

 

[divs4ever]

Plenty of things I know nothing about....

+ 1

but there are some areas i know a fair bit about but avoid investing there ( because they are nests of vipers and scorpions , that has saved some capital )

 

[rederob]

While metals across the board declined significantly in price over recent months, their fundamentals are barely changed in terms of tight supply.
Moreover, care is needed to check what data sources are really saying, with this as an example:

In the 20 plus years I have monitored metals, I can't recall live warrants for aluminium below 200K tonnes:

Typically when cancelled warrants exceed live warrants a metal's price will go into backwardation. I doubt that's far off for aluminium. Also, without knowing what is presently happening to Rusal's aluminium exports in the present climate, the chance of aluminium's price running faster than usual cannot be discounted.

 

[mullokintyre]

Aluminium hit a two year high today on the back of severely reduced production from RIO’s Queensland smelter running out of gas, which is not likely to rturn till later in year once they fix up the pipeline.
Mick

 

[Dona Ferentes]

anyone following? came across this;

Peter Milios: And Winston, just to finish off I wanted to touch on highlights from certain commodities during the week. Prices of aluminium soared following a collapse at Vedanta's alumina refinery, whilst both copper and nickel saw gains in the wake of the refinery collapse – which is interesting because you wouldn't assume the commodities are necessarily interconnected and then oil prices have been climbing due to a combination of factors.

Winston Sammut: In regards to aluminium, the collapse at Vedanta’s alumina refinery in India is a major concern for global aluminium supply. Alumina, derived from bauxite, is essential for producing aluminium, and disruptions like these exacerbate the tightness in the market. Prices on the London Metal Exchange surged 3% to $US2530 per tonne following the collapse. The aluminium market has already been strained by factors like Russian sanctions and operational issues at key refineries, so this incident only intensifies supply challenges. However, no human or livestock injuries were reported, which is fortunate.

 

[peter2]

I keep an eye on CENX (Century Aluminum Cpy). No price spike recently.
CENX has it's own problems, reducing their Al production.

 

[Dona Ferentes]

Basic process is:
1. Mining
2. Refine the ore to alumina (Al2O3)
3. Smelting to break the oxygen bond and turn alumina into pure aluminium
4. Processing of aluminium to other products - alloys, rolled sheet, powder, etc.

so, can't do much apart from recycling, without step 1.

Bauxite has flown under the radar in the aluminium supply chain given it historically has been in good supply – until now. It shot to relevance this year as environmental and safety inspections at Chinese mines led to a 16 per cent slump in the country’s output in the year to date.

That has forced China, which is also the world’s largest importer of bauxite, to source even more raw material from other countries including Guinea where it invested heavily in building out the supply chain. The West African country now accounts for about 70 per cent of China’s bauxite arrivals.

But analysts warn that there is a growing and unhealthy reliance on Guinea, particularly as other key producers including Australia, Indonesia, and Jamaica are also facing output constraints.



...The latest supply disruption took place in Guinea last week, where bauxite exports from Guinea Alumina Corporation, a subsidiary of Emirates Global Aluminium, were suspended because of customs issues. GAC accounts for nearly 4 per cent of global supply.

 

[rcw1]

Good morning
AFR Article written by Alex Gluyas and published 18.11.24 5.15pm: Goldman reveals the best commodities to buy for 2025

In part:
Goldman Sachs is urging investors to choose copper and aluminium over iron ore in 2025 as weak demand from China collides with an excess supply of Australia’s key export, keeping prices below $US100 a tonne.

The warning comes as the spot price of the steelmaking ingredient dropped 1.9 per cent on Friday to $US96.80 a tonne. Iron ore futures in Singapore spiked back above $US100 a tonne on Monday afternoon.

The latest sell-off was fuelled by signs of mounting supply. Shipments from Australia’s Port Hedland hit 45.6 million tonnes in October, taking this year’s total to 472.3 million tonnes – the highest in four years. That is adding to the mountain of stockpiles held at Chinese ports, which are set to enter 2025 at near-record levels.

“The sharp rise in iron ore stocks reflects weak China demand and strong Brazil supply, which should grow further in 2025, along with Australia supply,” said Goldman’s head of commodity research Daan Struyven.

“Without a significant increase in demand, which is not our base case, an iron ore price of $US95 a tonne is needed to keep a lid on highly flexible Indian shipments and rebalance the market.”
Goldman is tipping prices will average $US95 a tonne next year as stimulus in China proves more supportive of base metals, rather than iron ore. ANZ also forecasts prices at that level in the short term, while Westpac is even more bearish, tipping prices to slump past $US90 into next year.
Goldman warned that Beijing’s ongoing stimulus measures would have a limited impact on domestic steel consumption, and also flagged the risk of tariffs on Chinese exports under US President-elect Donald Trump.
“Potential tariffs pose a downside risk to flat steel apparent consumption, which has been a bright spot this year, and could bring domestic steel prices lower, reducing mills’ profitability,” Mr Struyven said.

Golden era​

China’s stimulus is instead expected to boost demand for copper and aluminium, as the world’s second-largest economy shifts its focus away from the property sector and looks to secure supply for the energy transition.

That is evident in growing sales of so-called new energy vehicles – electric cars and hybrids – with volumes last month up 66.4 per cent on a year earlier.

Goldman is tipping copper prices will average $US10,160 a tonne next year, representing around 13 per cent upside from current levels. Prices dropped below $US9000 a tonne last week for the first time in two months.

Morgan Stanley highlighted copper as its most preferred base metal next year, predicting prices will climb to $US9500 a tonne by the end of 2025.

Goldman sees aluminium averaging $US2700 a tonne, nearly 3 per cent higher than Monday’s price.

The forecasts form part of Goldman’s 2025 outlook, in which it warned investors to prepare for an “unusually wide range” of shifts in trade, energy and fiscal policy under Mr Trump.


It said that scenario strengthened the role that commodities would play in diversifying portfolios next year.

## Same article posted in Copper and Iron Ore threads...