Share prices of domestic aluminium companies fell sharply on Monday dragging the BSE metal index, which closed down 3.18%, according to Bloomberg data. The fall was in line with the negative stock reactions globally, analysts said. London aluminium prices fell as much as 4% on Monday after a Brazilian court approved emergency waste measures that could allow the world’s biggest alumina refinery to resume production, according to a Reuters report. Three-month LME aluminium fell 2.95% at $2,105.50 in intra-day trade on Monday, according to Bloomberg data. It closed down 1.82% at $2,130, the data showed. Amongst Indian aluminium companies, share price of Vedanta fell the most with a 14.99% fall in intra-day trade on Bombay Stock Exchange (BSE) hitting a 52-week low of Rs 197.10. However, it recovered a bit and closed down 10.78% at Rs 206.85. Hindalco Industries fell 14.50% in intra-day trade and closed down 7.69% at Rs 222.20, while National Aluminium Company fell 8.73% intra-day and then closed down 6.43% at Rs 61.10, on BSE, on Monday. Last week, the Norwegian aluminium and renewable energy company Norsk Hydro ASA had announced a full curtailment of its alumina refinery Alunorte, which had been running at 50% capacity, after it said that the area it was using for waste disposal was nearing its full capacity. This had raised fears of shortage of the raw material, which while saw the share price of Norsk to crash, that of some of the Indian companies like NALCO and Hindalco had gained. According to Norsk, the embargo imposed in February 2018 on Alunorte prohibited it from utilising new bauxite residue deposit areas (DRS-2) and state-of-the-art press filter. The company thus operated only DRS-1, which approached its end of life faster than expected, forcing a temporary shutdown at Alunorte and Paragominas (associated bauxite mine).
However, with the Brazilian court allowing the company to use press filter technology to process bauxite residue on Friday, it is expected to extend the life of Alunorte’s existing bauxite residue deposit area and enable the company to resume operations at 50% of capacity across the entire value chain, thus allaying the concerns around immediate alumina shortage.
Alumina prices surged to $620 a tonne last week from $591 the week before on expectations Alunorte would be wound down until some time next year, cutting market supply, according to Reuters.
Analysts at Edelweiss Securities said on Monday that aluminium prices have corrected 7% over the past three trading sessions as euphoria around cost-push evaporated with Alunorte receiving exceptional authorisation over the weekend to utilise press filter.
“While alumina futures are still trading around $620/tonne, up 25% over the past three sessions, we understand the correction in alumina-long stocks such as Alumina, South 32 and NALCO as an indication that this level is unlikely to hold.
Over the medium term, we expect alumina/LME Al ratio to be about 20%, down from around 32% in September 2018,” they noted.