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Aluminium/Bauxite

COLUMN-Indonesia bauxite ban slow-burn issue for aluminium – by Clyde Russell (Reuters U.S. – January 14, 2014)

http://www.reuters.com/

Clyde Russell is a Reuters market analyst. The views expressed are his own.

LAUNCESTON, Australia, Jan 15 (Reuters) – The immediate impact of Indonesia’s ban on exporting unprocessed mineral ores has been felt in nickel markets, but the slow burn, and potentially larger, may be in aluminium.

London Metal Exchange three-month nickel jumped 7.4 percent between the close on Jan. 9 and Jan. 14, when it ended at $14,340 a tonne. In contrast, London aluminium futures barely nudged up 0.6 percent over the same three-day trading period, and the benchmark contract in Shanghai weakened by 0.6 percent.

It may well be that the market is accurately reflecting more immediate concern over the supply of nickel, since Indonesia supplies about 13 percent of the world’s mined nickel.

But the likelihood is that any loss of Indonesian cargoes will act merely to lower the available surplus of nickel, suggesting that the current rally may not be sustained. However, the story with aluminium may be slightly different, at least over the medium to long term.

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Indonesia to China: Stop Buying Our Stuff – by Bruce Einhorn, Yoga Rusmana, and Eko Listiyorini (Bloomberg News – January 13, 2014)

http://www.businessweek.com/

Indonesian mines account for about 20 percent of the world’s nickel supply and a hefty chunk of the bauxite (used to make aluminum). China has been importing ever-larger amounts of these and other minerals from its Asian neighbor. Ironically, the more the Chinese buy, the angrier Indonesians become: Rather than purchasing refined minerals from Indonesia, China imports the raw rocks and does the processing itself, thus depriving Indonesians of jobs and tax revenue.

Miners took more than 250,000 tons of nickel out of Indonesian mines last year but processed only about 16,000 tons in-country, exporting the rest. Meanwhile, China refined more than half a million tons.

To make matters worse, through much of last year, China stockpiled Indonesian ore to hedge against any action the government in Jakarta might take to encourage more of the value-added work to stay home. The stockpiling makes Indonesian officials even more irritated. “I just returned from China, and I saw with my own eyes there are 3 million tons of bauxite and 20 million tons of nickel over there,” Industry Minister M.S. Hidayat told reporters on Jan. 8. “That’s what we want to stop.”

Indonesian President Susilo Bambang Yudhoyono is taking action do just that.

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Alcoa unit pleads guilty to Bahrain bribery – by Joe Mankak (USA Today – January 9, 2014)

 http://www.usatoday.com/

PITTSBURGH (AP) — A subsidiary of Alcoa pleaded guilty Thursday and, along with the parent company, will pay a total of $384 million in penalties for bribing officials in the kingdom of Bahrain through a London-based middleman.

A company official on Thursday entered the plea on behalf of Alcoa World Alumina, which will pay $223 million in fines and criminal penalties for violating the anti-bribery provisions of the Foreign Corrupt Practices Act. The law governs the conduct of American businesses abroad.

Parent company Alcoa must guarantee those payments and on Thursday also agreed to a separate $161 million civil penalty for related Securities and Exchange Commission violations. “Alcoa lacked sufficient internal controls to prevent and detect the bribes, which were improperly recorded in Alcoa’s books and records as legitimate commissions or sales to a distributor,” the SEC said in a news release.

The U.S. Justice Department said Alcoa World Alumina earned $446 million in profits by using the middleman to cut a long-term deal to sell raw materials to Aluminum Bahrain BSC, through other affiliated companies, including Alcoa of Australia.

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Walsh’s steely resolve for change of culture helps Rio Tinto turn around – by Andrew Burrell and Paul Garvey (The Australian – January 4, 2014)

http://www.theaustralian.com.au/business

SOON after arriving in London a year ago to begin his reign as chief executive of Rio Tinto, Sam Walsh took a stroll from his Kensington home to check out an antiques fair at nearby Sloane Square.

The avid collector of milk jugs — he has more than 350 of the cherished antiques stashed away in his other house in Perth — was in his element as he prepared to browse the collectables. “I walked up to the very first stand and picked up a Royal Worcester milk jug,” recalls Walsh. “And the lady looked at me and said, ‘Australian accent, interested in milk jugs, we know who you are — we’ve been expecting you!’ ”

Walsh roars with laughter when telling the story, partly because he cheerfully revels in the fact his passion for delicate milk jugs breaks all the stereotypes of the knockabout mining industry. But he knows too that it’s much harder to be anonymous — even at an antiques fair — when you’re running one of the biggest companies in one of the world’s financial capitals.

It’s even harder, it may be suggested, when you’re trying to lead the turnaround of a company that had spectacularly lost its way under predecessor Tom Albanese, culminating in more than $US14 billion in writedowns as a result of the failed 2007 acquisition of Canadian aluminium producer Alcan and the disastrous takeover of African coal play Riversdale Mining in 2011.

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Australian bauxite miners are pinning their hopes on a new market in China – by Kathryn Diss (Australian Broadcasting Corporation – December 19, 2013)

http://www.abc.net.au/news/

Australian bauxite miners are pinning their hopes on a turnaround in the struggling industry, with a new market likely to open up in China.

Indonesia has long satisfied China’s growing hunger for bauxite to feed its aluminium smelters, which has prevented Australian companies from entering the market.

Now that might change, with Indonesia expected to endorse tough, new restrictions on exports from January. Peter Kopetz from Stockbroking agency State One Capital says he has been closely watching the bauxite price increase in recent months.

“Some of the projects which maybe were marginal beforehand are becoming more economic as the price goes up and we’ve seen a gradual price increase over the last 12, 24 months and we see that continuing,” he said.

“There’s a push for Australia to become a more prominent player in the bauxite industry; we’ve got the quality, we’re close to China and of course we can supply long-term the raw materials to whatever china needs.”

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Massive investment will complete Kitimat smelter project – by Richard Gilbert (Journal of Commerce – December 9, 2013)

http://www.journalofcommerce.com/

Rio Tinto is planning to invest US$2.7 billion to complete the modernization of its aluminium smelter in Kitimat, B.C., while the company is cutting back on capital spending at projects around the world.

“For nearly 60 years, the smelter has been a major impetus for the economic development of northwest British Columbia,” said Jean Simon, president, primary metal, Rio Tinto Alcan.

“We are very proud to announce this US$2.7 billion investment to complete the modernization project. This is one of the largest private investments in B.C.’s history and it will ensure the sustainability of the aluminium business in Kitimat for decades to come.”

Rio Tinto announced on Dec. 1 that the US$3.3 billion Kitimat modernization project will be completed in 2014.
The project involves the demolition of several buildings on the site of the existing smelter and clearing space for a new plant.

The project began in 2011 and will create 2,500 jobs during the peak period of the construction phase.

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Rio Tinto looks to cut costs before selling aluminium business – by Angela Macdonald-Smith and Michael Hobbs (Sydney Morning Herald – December 4, 2013)

http://www.smh.com.au/

Rio Tinto chief executive Sam Walsh has signalled he will take more costs out of the aluminium business before any potential spinoff, after taking what he says was ”one of the hardest decisions of my life” to close the loss-making Gove alumina refinery in Arnhem Land.

Mr Walsh said the focus for Rio’s reintegrated aluminium division, as for energy, diamonds and industrial minerals, was on ”improving the business, reducing the cost, running it for cash, taking advantage of the capital that is already invested”.

The aluminium unit delivered $US450 million of Rio’s $US1.8 billion savings in operating costs in the 10 months to October 2013, with $US1 billion in cuts targeted by the end of 2014.

In August the miner scrapped a plan to spin off the Pacific Aluminium business housing some of its Australian and New Zealand assets after failing to find a buyer, and decided to reintegrate it back into Rio Tinto Alcan. The move sparked speculation Rio may look to offload all of Alcan, but Mr Walsh’s comments show more work is first needed on eliminating costs.

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Rio Tinto to cut capital spending on aluminum, coal – by Eric Reguly (Globe and Mail – December 4, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Rio Tinto, the mining giant that owns Montreal’s Alcan, provided more evidence that the era of massive spending on huge projects and acquisitions is over by pledging to shave billions of dollars off its capital spending budget.

The new era will see the Anglo-Australian miner focus on shareholder returns in an attempt to repair some of the damage triggered by years of overspending during the boom years, in the mistaken belief that strong global growth would propel commodity prices ever higher.

Rio CEO Sam Walsh on Tuesday said the company, the world’s second largest miner, after BHP Billiton, would cut capital spending by at least 20 per cent in each of the next two years. That means spending would fall to $11-billion (U.S.) in 2014 from $14-billion this year, and to $8-billion in 2015.

Speaking at investor conference in Sydney, Mr. Walsh said “We lost our way…We are taking decisive action. Don’t get me wrong, we have more to do.”

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No End to Aluminum Woes Until China Changes Tack – by Laura Clarke (Wall Street Journal – November 28, 2013)

http://online.wsj.com/home-page

The price of gold might’ve stolen the spotlight in recent weeks, but aluminum’s own skid to a four month low is worthy of closer attention, not least because there are signs are that the metal’s 30-month downward trend is likely to continue unless China changes plans.

According to the World Bureau of Metal Statistics, the global aluminum market was in oversupply by some 1.23 million tonnes in the first nine months of 2013, following a surplus of 539,000 tonnes for the whole of 2012. With so much metal above ground, prices this week slumped to their lowest value since July 2009, at $1,744 a tonne.

At these levels, it is estimated that close to half of the world’s production is loss-making.

Even amid that astonishing fact, even more aluminum may come on to the market both before and after the April implementation of a London Metal Exchange rule change that will require warehouses with delivery queues longer than 50 days to load out more metal than they load in.

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UPDATE 1-Rio Tinto to halt production at Gove alumina refinery (Reuters India – November 29, 2013)

http://in.reuters.com/

SYDNEY, Nov 29 (Reuters) – Miner Rio Tinto said on Friday it will stop alumina production at its Gove refinery in Australia, as the plant is no longer viable amid difficult market conditions.

Rio said it will start winding down production in the first quarter of 2014 and will continue the phase-out during the year. The process would take “some time”, it said.

The announcement was expected after Rio said earlier this week it had decided not to convert the Gove plant to use gas-fired power. The refinery, which employs 1,400 workers, is part of the Pacific Aluminium business that Rio tried to sell, but then reintegrated into its business in August.

The decision comes a day after the mining giant unveiled plans to increase its iron ore capacity towards 360 million tonnes by 2017, cutting costs by $3 billion by not digging new mines and slowing the expansion by about two years.

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