The immediate catalyst behind the rally was an operational disruption at Norsk Hydro’s Alunorte facility in Brazil, one of the world’s largest alumina producers. The company said Alunorte had been forced to cut output to 50% of capacity after its natural gas supplier, CELBA, reported an unexpected supply disruption.
Alumina is the key raw material used by smelters to produce primary aluminium. Any reduction in alumina output could therefore tighten raw material supplies and disrupt the global aluminium supply chain.
While Norsk Hydro confirmed that Alunorte intends to ramp alumina production back to full capacity as soon as natural gas availability permits, the road to recovery remains clouded by financial troubles at the supplier end. CELBA is owned by New Fortress Energy, a heavily indebted firm currently undergoing a complex financial restructuring. This ongoing corporate restructuring introduces noticeable uncertainty regarding how quickly full natural gas deliveries can be restored to the Brazilian refinery.
Middle East disruptions and multi-decade low inventories
This fresh production setback in South America lands on a market that was already struggling under severe operational pressures. Ongoing war involving Iran has severely disrupted physical metal shipments out of the Middle East, a crucial production hub that generates approximately one-tenth of the world's aluminum supply. Although metal prices temporarily backed off after the intense opening weeks of the conflict, they have mounted a strong rebound since late June.
Geopolitical deadlock signals prolonged price support
Industry experts believe that the combination of stalled Middle East peace talks and raw material bottlenecks will keep the global aluminum market tight for longer. Yan Weijun, head of nonferrous metals research at Chinese trading firm Xiamen C&D Inc., noted that negotiations in the Middle East are not proceeding smoothly, which should continue to provide solid support for aluminum prices. For Indian producers like NALCO and Hindalco, rising global prices and constrained supply offer a strong tailwind for realizations and profitability.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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