Aluminum Prices Soar on Alunorte Refinery Output Cut

Norsk Hydro's Alunorte alumina refinery in Brazil has cut its output by half due to a natural-gas shortfall. The company produces 6.3 million metric tons of alumina per year, and alumina is crucial as it takes two tons of it to make one ton of aluminum metal.

The gas supplier CELBA warned of disrupted availability, prompting Norsk Hydro to seek stopgaps such as buying gas on the spot market and securing direct access to the Barcarena LNG import terminal. This has resulted in a third-quarter hit of $75 million-$100 million for the company.

The reduction in alumina supply has driven up benchmark aluminum prices by 2% to their highest level since June 22nd, reaching $3,382.50 per ton on the London Metal Exchange (LME). The market is already experiencing low inventories, making any tightening at the input stage a significant contributor to price increases.

Norsk Hydro's decision highlights the critical role of energy in metals supply chains and its potential to ripple into headline prices quickly. Smelters that buy alumina may see their margins squeezed by higher costs unless aluminum prices rise enough to offset them, affecting integrated producers more than others.