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Alumina stocks rise on a good outlook for aluminium

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Shares in Australia’s Alumina have shot up after its joint venture partner Alcoa gave a positive outlook for aluminium demand.

Melbourne-based Alumina’s main asset is its 40 per cent stake in Alcoa World Alumina and Chemicals (AWAC), with Alcoa holding the other 60 per cent.

Alcoa, the world’s largest alumina business, posted a loss from continuing operations of $US193 million ($A188.85 million) in the three months to December 31.

Its fourth quarter revenue rose six per cent to $US6 billion ($A5.87 billion), beating analysts’ expectations.

Alcoa forecast seven per cent growth in global aluminum demand this year – compared to 10 per cent in 2011 – and 12 per cent in China driven by the aerospace and automotive markets.

Growth is also expected in transportation, packaging and construction.

Investors focused on the positive outlook, sending Alumina’s shares up nearly 6.85 per cent to $A1.17 on Tuesday.

AWAC’s results for the quarter were impacted by a drop of six per cent in the price of aluminum in the fourth quarter, taking the full-year drop to 18 per cent.

Alumina prices were also lower in the three months to December, while cost pressures increased, Alumina chief executive John Bevan said.

“The impact of the difficult market conditions and some restructuring initiatives on AWAC’s quarterly result was partly offset by productivity gains,” he said.

There was also an after tax profit of $US30 million ($A29.36 million) from the sale of land in Australia which was surplus to requirements, Mr Bevan said.

Alcoa has forecast a global aluminium supply deficit of 600,000 tons in 2012, following cutbacks in production.

The company, which has 17 per cent of global production, last week announced it would close 12 per cent of its aluminium smelting capacity, cutting 240,000 tonnes a year.

It has not flagged a shutdown of any Australian operations.

Mining giant Rio Tinto has also shut down capacity amid plant failures and industrial disputes.

It is also in the process of selling many of its aluminium assets, including all of its Australian smelters and its troubled Gove bauxite mine in the Northern Territory.