Citing a fall in global alumina prices, India’s state-run aluminium firm National Aluminium Company Ltd (Nalco) said late last week that it will reboot its strategy regarding sales of the aluminium precursor, with a return to long-term contracts likely.
Up until recently the firm has been selling spare alumina on the spot market in an effort at cashing in on higher prices. With prices reaching nearly US$600 per metric ton of alumina on the spot market, Nalco reaped significant margins for a stretch in the prior fiscal year. The firm sold upwards of 95 percent of its surplus aluminium on the spot market in the last fiscal, leading up to sales in the US$700 per metric ton range towards the end of last year.
However, thanks to the end of United States government sanctions against Rusal and the return to production of Norsk Hydro’s Alunorte alumina smelter, prices have fallen back to Earth in recent months. Prices on the spot market have fallen as low as US$300 per metric ton, punishing alumina refiners and helping drop Nalco into rare red-ink territory in the second quarter.
According to an unnamed source who spoke to domestic media on condition of anonymity, weak prices for both alumina and aluminium has prompted Nalco officials to begin considering a return to longer-term agreements with major international buyers.
“Hardly 0.3 million tonnes of our surplus alumina in FY19 was liquidated via long-term bilateral pacts. We preferred to sell an overwhelming quantity of alumina in spot markets as prices were on a roll. But given the sobering price trends of alumina, we may do rethink on our strategy and divert more quantum of alumina to long-term sales.”
Regardless of the selling agreement Nalco may sign, experts say the price of alumina has fallen back to a near-standard range. Last year’s market turmoil saw alumina prices rise from their typical place at between 14 and 15 percent of aluminium and double to 30 percent of aluminium’s price. However, now that Rusal is unencumbered and Alunorte is back to full production, alumina’s prices have hovered around 16 percent of that of aluminium.