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A: There are two predominate cost drivers through the mining, refining and smelting phases of aluminum production: electricity in the smelting phase and bauxite supply (including transportation, handling and waste disposal) in the refining stage. Bauxite mining typically is low-cost surface mining with little or no overburden. Other energy costs to fuel calciners and steam production in the refining stage also play significant roles.
Guinea Alumina has several advantages. One is its very low cost of around $12 per metric ton of alumina produced versus up to $120 per metric ton for some of the older North American and European refineries remote from their source of bauxite. The figures for some of the refineries in China, which do not have their own indigenous bauxite, can be even higher., In addition, since Guinea Alumina exclusively supplies alumina to aluminum smelters which price alumina as a percentage of the price of aluminum it should reap the benefit of the higher revenues of this phase of production while maintaining a low cost structure despite structurally higher energy (electricity) costs.
A: As a strong, lightweight and versatile material, aluminum has applications across many sectors of developed economies, including transportation, construction, food and beverage packaging, and its penetration has been increasing due to its relative cost and environmental (fuel economy and recycle-ability) advantages. In recent years, the aluminum market has grown slightly faster than world GDP growth, and in 2006, the markets for aluminum and alumina were on the order of 35 million metric tons and 68 million metric tons. Industry experts are forecasting aluminum/alumina demand growth to continue well ahead of world GDP growth due both to continued development of the massive currently under-developed populations around the world, especially China and India, and to further penetration (material substitution) in existing applications. Brook Hunt recently forecast an alumina demand increase of 20 million metric tons per year by 2011. That indicates a need for supply increases of more than six of Guinea Alumina’s first-phase, 3.2 million metric tons per year refineries.
A: Alcoa dominates alumina supply to the third-party market in the western world and Chalco dominates the Chinese market. The third-party market for alumina is only roughly 25 percent of the total market as integrated aluminum companies consume the other 75 percent within their own integrated production systems. Some of the this third-party alumina is sold to certain integrated producers that are short of alumina production capacity, but most of it is sold to independent aluminum smelters that have no ownership interest in bauxite and alumina production capacity. Since Glencore sold its alumina production assets to United Company Rusal, and as Alcoa controls marketing of all Alcoa World Alumina’s production, Global Alumina is essentially the only truly independent alumina supplier to the industry. This is why it makes sense to partner with fast-growing independent aluminum smelting companies like DUBAL and Mubadala, and an alumina-short, expert industry giant like BHP Billiton.
A: Though the recent consolidation reduced the field of potential industry partners and extended the duration of Global Alumina’s competitive bidding process, industry consolidation should have a very positive, long-term effect on Global Alumina’s profitability and growth prospects because highly concentrated industries generally exhibit greater control over market supply and pricing. As a minority, independent supplier to the market positioned as it is on top of the prime developable resource with premier partners, Global Alumina should reap the benefits of both.
A: Though modern science continually discovers and develops new materials and/or new applications for existing materials, there is nothing on the horizon that would have a material impact in the indefinite future on the anticipated growth in aluminum demand. Though there is a lot of talk about composite materials increasing their share of the aviation market this is a small, specialist part of the aluminum market. By far the largest share of the transportation market is taken up by motor vehicles and here the amount of the metal in each vehicle is rising as well as the overall numbers of vehicles produced Worldwide.