Coronavirus restricting alumina supply, smelting impact still unclear: Alcoa

Within the aluminum supply chain, the coronavirus outbreak has had the most visible impact on alumina supply, but the effect on aluminum smelting is not yet fully evident, Alcoa CEO Roy Harvey said Tuesday.

Bauxite shipments into Chinese ports have continued as normal, but transport of the bauxite from the ports to inland refineries have faced disruptions due to issues related to the virus outbreak, Harvey told participants at the BMO Capital Markets Global Metals & Mining Conference in Hollywood, Florida.

"For the refiners, and particularly those refineries inside of China, they are starting to see real supply chain bottlenecks, whether its bauxite or caustic soda or coal gas," Harvey said. "We're now seeing impacts on 3 million to 5 million mt of refining capacity that is lowering alumina production."

Bauxite and alumina deliveries have been hindered by restricted inland road access in China as officials attempt to control the outbreak.

Harvey said transportation issues and alumina shortages in China were driving up the country's alumina prices, as well as alumina prices around the world.

The Platts Australian alumina daily assessment was $299.5/mt FOB Tuesday, up from $275/mt on January 2.

"That's a very good thing for alumina pricing, but the aluminum smelters are demanding that alumina," Harvey said. "But in smelting, we have not yet seen an impact in supply. Now, smelters will also run short of anodes if they can't get them delivered, and they will run short of other carbon products."

While the impact on aluminum smelting is still unclear, Harvey said he expects to see more pressure on alumina and aluminum demand.

"How that will be impacted and how long that will go on is still a very hot topic of conversation," he said.

BURGEONING DEMAND FOR SUSTAINABLE ALUMINUM

Harvey said Alcoa has begun to see a growing interest in its low-carbon and recycled aluminum products as it continues to gain certifications from the Aluminium Stewardship Initiative.

"We are starting to see more and more customer demand for it," Harvey said. "Now, that demand has not yet translated into significant premiums as it's still a niche product area."

However said the demand was first evident in Europe but has since crossed over into the US.

"It's nascent, but I would say that over these last six months, and in conversations that we have been having with investors and customers, it is the drum beat that has been getting louder and louder," Harvey said, in reference to the rising interest in sustainable aluminum.

Alcoa now has 10 locations on four continents certified under ASI's standards. Last week, the company also received ASI's certification to market products under its Chain of Custody standard.