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BHP South Africa aluminum plant strike yet to impact Japanese buyers

Platts.com reports that the strike at BHP Billiton’s(NYSE:BHP) South African Smelter, has yet to impact their largest buyers, Japan.

The story is quoted as saying:

Shipping schedule changes at the end of the year are typical, and there is little concern over possible shipping delays, even if the strike at the smelter stretched to next week, traders added.

 To access the full story, click here.


China’s Chinalco, Chalco formalise Africa JV with Rio Tinto

On Thursday, the state-run parent of Aluminum Corp of China Ltd. (2600.HK) formalised a joint venture with Rio Tinto (RIO.AX) to develop iron ore in Africa, bringing the listed Chalco into the project as it moves to diversify beyond its core aluminum business.

The press release is quoted as saying:

Chalco’s (601600.SS) parent, known as Chinalco, had signed a $2.9 billion non-binding pact with Rio Tinto in March to develop the project. Chinalco holds a stake of around 9 percent in Rio.

Click here to access the entire press release


Investing in Aluminum: What Investors Need to Know

Aluminum is one of the most abundant metals on Earth, and is known for being malleable, lightweight, conductive and very resistant to corrosion. It is used in everyday items such as pop cans and cookware, as well as in automobiles and aircraft. In fact, its role in the transportation industry has continued to grow as manufacturers make the switch from steel to aluminum.

For those looking at investing in aluminum, there are a few different ways to go about it: through aluminum exchange-traded fund (ETFs), aluminum futures and, last but not least, aluminum stocks. Here the Investing News Network explains what market participants need to know when investing in aluminum.

Aluminum ETFs

Investing in aluminum ETFs is a good route for those looking for exposure to the metal without a futures account and without having to corner the market on stocks or physical assets. For those not familiar with ETFs, they are essentially marketable securities that track either an index, a commodity, a bond or a basket of assets like an index fund. ETFs trade on stock exchanges and offer a couple of advantages, such as tax benefits.

However, one downside to investing in aluminum ETFs is that there are just two options to choose from: the iPath Bloomberg Aluminum Subindex Total Return SM IndexETN (ARCA:JJU) and the Pure Beta Aluminum ETN (ARCA:FOIL). There was a third option called the Global X Aluminum ETF, but it closed down in 2013 due to lack of investor interest.

Aluminum futures

Investing in aluminum futures is another option available. A futures contract is basically a contractual agreement to buy or sell a specific quantity of a commodity at a predetermined price at a specified date in the future. Contracts are held at a recognized stock exchanges, with those exchanges mediating and facilitating the involved parties. Because everything is predetermined, investors are protected against adverse price changes — similar to an insurance policy.

CME Group (NASDAQ:CME), an American futures company and one of the largest options and future exchanges, offers a unique option: a physical aluminum futures contract. The company states on its website that this contract “offers the ability to deliver or take delivery of Primary Aluminum T-Bars, Sows, and Ingots in a timely, transparent, and efficient fashion at CME Group registered and regulated facilities.”

The London Metal Exchange also acts as a platform for individuals to invest in both futures and options, including an aluminum futures contract, with specifications put in place to regulate activity among members.

Aluminum stocks

Finally, investors can choose to put their money directly into aluminum stocks — companies that are involved in the extraction or production of the metal. There are a number of companies investors may be interested in, especially those that have been able to survive amid recent low prices — many of those are larger producers that have lower costs.

Some of the large companies in the space include Alcoa (NYSE:AA), Century Aluminum (NASDAQ:CENX), Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) and Norsk Hydro (OTCMKTS:NHYDY). Other aluminum companies worth mentioning are Alumina (ASX:AWC) and South32 (ASX:S32), a spin off of mining giant BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT).

Aluminum market

Looking at overall aluminum market trends, BMO Capital Markets and Metal Miner have both recently lowered their price forecasts for the year, despite a brief price hike that took place in May.

However, Norsk Hydro, a global aluminum production company, told Platts this month that global primary aluminum consumption increased by 5 percent year-over-year in Q2 2015, reaching 14.8 million metric tons (MT). All in all, the company sees global primary demand for the metal rising by 2 to 3 percent during 2015, and is confident in its future.

Similarly, Alcoa Chairman and CEO Klaus Kleinfeld is positive on his company’s prospects. “In the upstream, our Alumina business delivered its best first half since 2007 and our lower cost metals business showed resilience in the face of strong market headwinds,” he said in a release this month. “Productivity and cash generation were excellent.”

For patient investors, then, aluminum may be a good market to consider getting into. Though the metal’s prospects are currently a little lackluster, industry heavyweights seem confident in its long-term future.

 

Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article. 

Related reading: 

Aluminum Price Outlook: BMO Says ‘Lower for Longer’

The Aluminum Recycling Revolution


New Bauxite Mines Set to Benefit from Aluminum Deficit?

New Bauxite Mines Set to Benefit from Aluminum Deficit?

Work has begun on Tasmania’s first bauxite mine in 30 years, bringing jobs to an industry looking to take advantage of growing interest in the aluminum market.

Bauxite, the third most abundant metal in the Earth’s crust, is the first stop in producing aluminum. Bauxite is refined to alumina, which through a smelting process is then turned into aluminum. Bauxite is usually strip mined, as it’s normally found near the surface of the terrain. Australia produces 23 percent of the world’s bauxite.

Australian Bauxite (ASX:ABX) has begun construction on its Bald Hill project, which will create about 45 direct jobs and a further 135 indirect jobs in the local economy. Australian Bauxite conducted exploration on the property in 2010 and has since moved to have those initial exploration licences turned into a full-fledged project. The company expects 1.6 million tonnes of bauxite to be mined from the three pits that make up the property.

“The opening of the Bald Hill mine will not only generate welcome economic activity but showcases the mineral diversity and potential of Tasmania,” Paul Harris, the country’s minister for resources, is quoted as saying by Australian Mining.

The news coincides with the announcement of an inferred mineral resource estimate for the Toubal bauxite deposit in Guinea, West Africa. Anglo-African Minerals (ETR:AMQ), which owns the property through subsidiaries Tougue Bauxite and Alumina, said the estimate came in at 722 million tonnes averaging 42.6 percent total alumina and 3.7 percent total silica.

“[W]e are further encouraged by the fact that the very limited confirmatory exploration is required in order to upgrade the Mineral Resource into higher confidence categories, potentially in the Measured and Indicated categories,” said James Lumley, CEO of Anglo-African, in a statement. “This Project represents a large resource base in a location that is likely to benefit strongly from third-party infrastructure developments in the country.”

An estimated deficit in aluminum supplies could trigger a rush in demand which would in turn increase the price of bauxite. Due to China’s need for aluminum — it leads the world in demand and consumption — combined with falling production in North and South America, a hole in supply is expected. Wang Chunhui, an analyst with Shanghai Metals Market, has predicted a price range of $1,850 to $2,150 per tonne throughout the year.

 

Securities Disclosure: I, Nick Wells, hold no direct investment in any of the companies mentioned in this article.

Related reading: 

Aluminum Outlook 2015: Hope in Deficit


Century to Restart Hawesville Potline by Year End

Reuters Africa reports Century Aluminum Co.(NASDAQ:CENX) is to restart the potline at its Hawesville, Kentucky, smelter by year-end and start construction on the Helguvik, Iceland, smelter in early 2012.

The market news is quoted as saying:

Century curtailed the potline in March 2009 to contain plant costs while faced with depressed aluminum prices.

Click here to access the entire news


Chalco Says Discussions on Australia Project Terminated

Reuters Africa reports that Aluminum Corp of China (NYSE:ACH) said its discussions over possible development of bauxite resources in Australia had ended .

The market news is quoted as saying,

Also known as Chalco, the top alumina and aluminium maker of China said it spent about 340 million yuan ($52.6 million) on the project, adding it would evaluate the amount recoverable and make corresponding provisions for impairment.

For the complete market news, click here.


Rusal Holds Talks With Guinea to Develop Bauxite Deposit

Bloomberg reports that aluminum producer United Co Rusal (HKG:0486) is in talks to develop mines in Guinea.

The market news is quoted as saying,

The African nation’s government plans to introduce new rules on mining concessions, Vladislav Soloviev, first deputy chief executive officer of Moscow-based Rusal, told reporters today. Rusal expects the policy change won’t affect the Dian Dian venture because it isn’t a new project, Soloviev said.

For the complete market news, click here.


Eskom Interrupted Power to BHP Billiton Aluminum Smelter on Low Supplies

Bloomberg reported that power to BHP Billiton’s (NYSE:BHP) South Africa smelters was cut due to low power supplies.

The market news is quoted as saying:

Eskom also invoked power-reduction agreements with large customers it can’t name “more frequently, almost daily,” Hilary Joffe, a spokeswoman for Johannesburg-based Eskom said by phone today.

To read the full market news, click here.


Rusal Sees Steady 2011 Aluminium Output Growth

Reuters Africa reports that Rusal Plc (HKG:0486) sees steady output growth in 2011, driven by strong demand from China and a rebound in North America.

The market news is quoted as saying:

Its shares closed at a record high on rising output and hopes that the aluminium giant is inching toward a sale of its stake in top world nickel miner Norilsk Nickel (GMKN.MM: Quote) which could effectively erase its debt of more than $11 billion.

Click here to access the entire news


Strong aluminum demand boosts Novelis results

Reuters Africa reports that Novelis Inc posted a net quarterly loss on Tuesday, but said growing global demand boosted adjusted earnings.

The market news is quoted as saying:

The net loss was $46 million for the third fiscal quarter of 2011, compared with net income of $68 million for the same period in fiscal 2010, said the Atlanta-based company, which is a subsidiary of India’s Hindalco Industries Ltd

Click here to access the entire news


BHP Workers Strike at Its Largest Aluminum Smelter

Bloomberg.com reports that workers at BHP Billiton’s (NYSE:BHP) South African Aluminum smelter have gone on strike, demanding higher wages.

The story is quoted as saying:

The National Union of Metalworkers of South Africa, which is demanding a 12 percent wage increase, said others will join the 200 employees who began the walkout at the Hillside and Bayside smelters owned by world’s largest mining company.

To access the full story, click here.


Aluminum Demand to Rise 5.3% a Year, Output Increase Needed, Rio Projects

Bloomberg.com reports today that in anticipation of the increased need for aluminum ( 5.3%/ per year for the next decade), aluminum producers will need to increase global output by two-thirds, according to executives at Rio Tinto’s (NYSE:RIO) Alcan division.

The story is quoted as saying:

Unless new smelters are built by 2020, demand for the metal used in car parts and airplanes will outstrip supply by 27 million metric tons a year, Amir Mirchi, vice president of business development for the Middle East and North Africa at Rio Tinto Alcan, said, citing company forecasts. Global aluminum production and consumption this year will probably rise to about 40 million tons, he said.

For the full story, click here.


Guinea threatens RUSAL workers as strike continues

On Tuesday, workers at RUSAL’s (0486.HK) Friguia alumina refinery in Guinea blocked production for the sixth day in a row after initial negotiation efforts failed and the government threatened to send in security forces.

The press release is quoted as saying:

The plant, the largest industrial project in the fractious West African nation, has a capacity to produce around 640,000 tonnes of alumina per year, which the Russian firm then ships around the world to be refined further into aluminum.

Click here to access the entire press release

Click here to access UC RUSAL Corporate Site


Anglo Aluminum Acquires Mamou-Dalaba Bauxite Project

Anglo Aluminum Corp. (TSX VENTURE:ALU) reported the acquisition of the Mamou-Dalaba bauxite property in Guinea, West Africa.

The press release is quoted as saying:

Anglo Aluminum retained Coffey Mining (Coffey) of Perth, Australia to complete a preliminary assessment of the project. Based on the high-prospectivity of these plateaus, Anglo Aluminum is working with Coffey to develop a program to quickly confirm these bauxite targets through drill testing. Anglo Aluminum acquired the Mamou-Dalaba project through an agreement to purchase 100% of the issued share capital of Societe Guineenne de Fer et de Bauxite (SGFB), a local Guinean company that holds the 4 Mamou-Dalaba bauxite permits.

Click here to access the entire press release

Click here to access Anglo Aluminum  Corporate Site


A Rosier Outlook for Japan’s Economy

By Leia Michele Toovey- Exclusive to Aluminum Investing News

Aluminum stockpiles have risen consistently this year amid the downturn in the auto sector; however recent evidence that the economy is improving combined with confidence in Chinese purchases have lifted aluminum demand.

Aluminum demand in Japan has improved as carmakers and machinery producers increased output after reducing inventories. Aluminum stockpiles in Japan dropped by 15 per cent in June from a month earlier to the lowest level since July last year. Inventories in Yokohama, Nagoya and Osaka ports fell to 207,600 metric tonnes at the end of last month compared with 243,300 tonens on May 31 and 202,800 tonnes a year earlier.

After hitting the bottom in the first quarter, domestic demand has been gradually improving. The country’s $269 billion in stimulus spending helped consumer sentiment climb to an 18-month high in June. Stockpiles also fell as trading companies and aluminum rolling mills pared purchase volumes under supply contracts this year. The government yesterday said the economy is “picking up” and upgraded its view of exports, business sentiment and consumer spending, which accounts for more than half of the country’s economy.

Despite the rosy report out of Japan, analysts warn fundamentals remain poor. “Chinese demand for aluminum remains robust however, some of the recent strength can be explained by government purchases and a restocking effect,” Standard Bank said in a note. The Chinese government has now officially ended its non-ferrous metals stockpiling, so demand will moderate in the coming months and imports will normalize. On the LME, stocks of aluminum continued to rise hitting a record high above 4.4 million tonnes. Aluminum MAL3 closed at $1,561 a tonne from $1,572 at the close on Friday, after data showed stocks of the metal used in transport and packaging surged 43,125 tonnes overnight. Secondary aluminum prices in Europe rose at the end of last week as the recent pickup in demand shortened supply.

Company News

Alcoa Inc., the largest U.S. aluminum producer, said Wednesday it lost $454 million during the second quarter, as the global recession continued to dampen demand and prices for the lightweight metal. It was Alcoa’s third straight quarterly loss.

BHP Billiton LTD, Africa’s biggest aluminum producer, will stop output of some products at its Bayside smelter in South Africa at the end of September as demand weakens. “Bayside has experienced a sharp decline in domestic demand,” spokeswoman Bronwyn Wilkinson said “. The smelter will stop so-called casting rod and billet, and keep supplying slab metal,” she added.

Venezuela’s state aluminum smelters have continued to operate normally despite the start of a strike by workers demanding the government address industry problems they blame on outmoded equipment and insufficient investment. Spokesmen for the Alcasa and Venalum smelters said some workers had stayed away, but there was enough staff to maintain production. Venezuela’s government promised months ago to launch a plan to revive the aluminum industry, but has not yet done so. Industry officials have estimated it will take more than $1 billion to pay debt and invest in adequate new technology.


Aluminum producer’s squeezed

Aluminum producers struggling with low prices

Aluminum producers struggling with low prices

By Leia Michele Toovey- Exclusive to Aluminum Investing News

Aluminum producer’s cutbacks have done little to stabilize the metal’s free fall. In London, the price of aluminum fell to $1,321 per tonne from $1,345. In New York, it was selling for 59 cents per pound.  Six months ago, the metal’s going rate was $1.50 per pound.

Aluminum’s low price, in conjunction with the lack of equity to keep operations running is squandering producer’s stock value. Alcoa Shares fell to a 52-week low on Thursday on the New York Stock Exchange, down 97 cents, or 15.5 per cent, to $5.27. Kaiser Aluminum Corp was down 14 per cent at $16.95, and Century Aluminum Co lost 17 per cent at $1.24.

Chinalco’s investment into Rio is still generating a buzz.  The state owned corporation downplayed concern it will control Rio Tinto Group through a planned $19.5 billion investment, as it lobbies Australia not to block the deal on national interest grounds. The chairman of the company, Xiong Weiping, spoke in a press conference, stating that Chinalco won’t achieve “any control in any sense.” The Chairman is in Australia, meeting with Australia’s Foreign Investment Review Board. Shareholders are “concerned” about the investment, the Australian Shareholders Association has said. Beijing-based Chinalco would raise its stake in Rio to 18 per cent if all of the debt it’s buying were converted to stock.

The investment by Chinalco, already Rio’s largest shareholder, is part of $25 billion in spending on mines and companies planned by China last month as commodity prices slumped to seven-year lows. Chinalco agreed Feb. 12 to buy stakes in Rio projects, including iron ore and copper mines in Australia and Chile, for $12.3 billion and purchase $7.2 billion of convertible bonds.  The alliance between Chinalco and Rio is rare; joint ventures between a listed company and its major shareholder are not very popular.  If the joint venture does go through, it will be governed by a special committee that will have representatives from both sides.

South Korea recently announced its plans to boost strategic aluminum and copper reserves by 46 and 23 per cent, respectively. “This year offers the best opportunity to achieve value for money in stockpiling. We plan to actively purchase in the first half as metal prices are likely to gradually recover later this year,” Kwon Tae-kyun, administrator said.  The plan will enable the country to boost domestic reserves at low prices, preparing for increased demand in 2010 when the economy is expected to recover. The country raised its reserve target from a previous plan of 160,000 tonnes to 205,000 tonnes of aluminum.  Aluminum, which domestic companies rely heavily on government purchases and rare metals, will be the focus of purchase plans.

United Company RusAl, has a two month reprieve from debt payments as it tries to renegotiate $7.4 billion of borrowings from foreign banks. RusAl said the agreement covered more than 30 transactions involving more than 70 banks, including syndicated and bilateral loan agreements, bank guarantees and letters of credit. Russian banks and the majority of foreign lenders support the standstill, RusAl said. During the payment freeze, RusAl will reorganize debts “to the benefit of all stakeholders,” it said. RusAl may convert some of that debt into shares, RusAl chairman Viktor Vekselberg said in January. RusAl amassed $14 billion of debt as it expanded smelters in Siberia, acquired a mine and a smelter in Africa and agreed to help finance nuclear and hydropower plants in Russia. Then, the price of aluminum dropped 60 per cent, leaving the company with less cash flow to pay down debt.


Introduction to Commodities Investing

Many resource companies are listed on the TSX

Many resource companies are listed on the TSX

If you are like many people, the last time you read about commodities in the news was when Bre-X Minerals collapsed in 1997, after news broke that the company had falsified results and the gold they had reported was nowhere to be found.

Thousands of investors all over the world lost billions of dollars and the entire junior mining market was painted with that same brush. Stories of past failures were relived and every junior mining company, legitimate or not, was forced to survive without new financing. Many juniors didn’t make it. Much of the financing capability that existed in the junior mining market went onto the greener pastures of junior tech companies just gaining momentum opposite the Internet’s rising popularity.

As a result, very little money was invested in exploration for new mining projects. Commodity prices were low, making a bad situation for explorers even worse. This drought in financing was to last almost a decade, but that didn’t stop the growth of economies in developing countries. Many of those—such as China, India, Brazil, and Russia—have now emerged as economic powerhouses hungry for commodities like never before. Many people see these factors resulting in a long period of demand for new mining projects that are primarily identified by junior resource companies.

Another outcome from the Bre-X scandal was a modernization of the junior exploration industry from a regulatory perspective. The Canadian Securities Administrators (CSA), a forum for the 13 securities regulators of Canada’s provinces and territories to coordinate regulation of the Canadian capital markets, created guidelines for how companies disclose scientific and technical information about what the find when exploring for minerals. Reports not only need to meet these guidelines before being published, but the findings need to be vetted by external, independent organizations who guarantee the reports are real. Guidelines exist for everything a company says about its findings, whether the information is being disclosed in press releases, web sites, advertisements, or via word of mouth.

So, are junior resource companies now safe investments? Many investment advisors would say no. Much like early stage technology companies or pharmaceutical companies, the junior resource company is based around an idea which may or may not become economically feasible when developed. Success of a mine will depend on whether the minerals in the ground can be sold for more than their cost of extraction and shipping to potential buyers. Not only does this depend on the cost of setting up a mine and processing the ore, but also on the market price for the commodity being sold and proximity to the market it’s being sold in. Like so many entrepreneurial situations, myriad things can go wrong.

But the opportunities are also significant. Digging gold out of the ground is something that captures the imagination of many people from a very early age. Significant portions of the economies of countries like Canada, Australia, South Africa, and others are derived from mining.

So as with most investments there are risks and rewards, often in lock-step. Many investors hire experts to manage their money rather than doing the investigation required to increase the chances for success. But to those who decide to go the extra mile and investigate in hopes of finding the next great company: rest assured the mining industry has progressed to the point where regulations and controls mean the information you’re presented with has been reviewed by experts in the field who stake their reputation on its accuracy.

For information on investing in specific metals and minerals, see the Introduction to Gold from the editors of GoldInvestingnews.com, Silver Fundamentals from Silver Investing News.com, the Introduction to Copper Investing at Copper Investing news, the What is Uranium article on Uranium Investing News, the Introduction to Nickel Investing from Nickel Investing News, and the lead investment overview at Intro to Lead Investments from Lead Investing News.

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