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Interview with Ami Shivkar, Principal Analyst for Aluminium Markets at Wood Mackenzie

We spoke to Ami about Bauxite and Alumina policies, Aluminium price influences, and more

You can hear more from Ami at this year’s Bauxite and Alumina Conference taking place in Miami in March.

Fastmarkets (FM): Hi Ami, thank you for participating in this interview. What do you think has been the biggest change in the Bauxite and Alumina industry over the last 24 months?

Ami Shivkar (AS): The bauxite and alumina landscape is increasingly subject to government regulations. Policy-led bauxite supply tightness in China due to environmental regulations was at best impacting refinery margins, or worse, starving refineries of bauxite. Uncertainty surrounding the timing of the resumption of full production at the Alunorte refinery also adds to alumina price volatility.

The aluminium market experienced a turbulent year, against the backdrop of sanctions, tariffs, and Alunorte's curtailment. Supply fundamentals remain tight both for metal and alumina. But that is not enough to support the aluminium price as demand concerns take centre stage.

FM: How will the market respond to a drop in Aluminium prices and an increase in raw material prices?

AS: On an ingot basis, 40% of the world ex-China smelters are losing money at current LME aluminium prices. Our C1 cash cost methodology assumes that all smelters produce standard ingot. In reality, smelters produce a different mix of cast products. To account for this, Wood Mackenzie models a commercial cast house cost curve. Smelters that produce value-added products at their associated cast houses are able to collect a premium that in normal market conditions is higher than the additional cast house and alloying costs incurred. On a commercial cast house cost basis, we estimate that only 5% of the world ex-China’s smelters are cash negative. Due to the higher proportion of value-added products, World ex-China smelters aren't as acutely impacted. High-cost smelters, especially in Europe and South America have trimmed output.

By contrast, China produces mostly ingot and molten metal, so on a commercial cast house basis, half of the country’s smelters are cash negative at the current SHFE price. China smelter cuts accelerated to 2.9 Mt amid weak price and demand.

FM: When we spoke earlier this year, you said that the Chinese Alumina market is under a lot of stress. How is the market doing now? Are they still facing the same challenges?

AS: The bauxite mine closures resulted in cuts at alumina refineries in Shanxi and Henan last year. Not to mention higher bauxite prices. The mine closures have now eased and bauxite prices have fallen slightly. But Chinese refineries are now hit with lower alumina demand as smelters cut metal production. Lower margins still prevail as cost pressures have given way to lower China alumina prices.

Ami Shivkar joined Wood Mackenzie in 2010, specialising in aluminium supply and alumina markets. She co-authors the Aluminium Market Service and is responsible for conducting detailed supply-demand analysis. Prior to joining Wood Mackenzie Ami worked as an Analyst with Morgan Stanley Capital International in Mumbai, India. She holds an MBA in Finance from the University of Mumbai.

You can hear more from Ami at this year’s Bauxite and Alumina Conference taking place in Miami in March.
This content is provided by Industrial Mineral Events for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.