Though many stakeholders in the global aluminium sector fear the consequences tariffs levied upon them by the United States government may have, Alumina Limited’s chief sees such a turn of events as an opportunity for his firm.
Mike Ferraro indicated in an interview with The Australian Financial Review that increased tariffs on imported aluminium enacted by President Donald Trump may well lead to an increase in alumina sales to North American buyers.
“It depends what the response is in the US, if the response is that more idled (aluminium) smelter capacity will open up again, then they will have a demand for alumina and if we have got it, we will probably sell more alumina into the US.
“Correspondingly outside the US you might have a reduction in alumina demand…it is quite complicated but I think it could be positive overall for us as producers, not necessarily for consumers in the US where the price could go up.”
Although the likelihood of the United States government enacting tariffs on imported aluminium has dominated headlines in recent days and weeks, Ferraro pointed out that supply-side reforms occurring in the People’s Republic of China at present may also exert a significant force pulling global supply back in line with demand.
“There are structural reforms in China around concerns for the environment and inefficient capacity which means that both alumina and aluminium capacity is reducing and being less available into the market and we think the winter cuts they currently have on at the moment will continue next year.
“There has been a fundamental change in the structure of the industry which I don’t think most institutional investors have realised, they may be thinking it is just one really good year.”
In addition to speaking on the possibility of tariffs, Ferraro addressed the state of his firm, as he is now in his tenth month at the helm.
“We have been converting ourselves from a reactive organisation to a proactive one, whilst we don’t actually run the refineries and bauxite mines, we are very proactive in the major strategies that are important to us and important to Alcoa in the joint venture, so it is a hell of a lot more than a postbox.”
Though the firm is contractually prevented from owning alumina and bauxite assets apart from those owned in the joint venture with Alcoa, he indicated that acquiring operations outside of those sectors isn’t completely out of the question. However, Ferraro also recognized that many of the company’s investors are attracted to it due to its concentration upon bauxite and alumina.
“They like the purity of the investment…in that sense it would not be an easy sell to persuade our shareholders that we should be going into those (other) areas,” he opined.