Alumina Prices Might Rebound; Rise of Share Price Made Record

Since Citigroup raised its rating on the stock, the share price of alumina producer-Alumina Limited (ASX: AWC) whose headquarters is located in Melbourne Australia rose significantly, which made its biggest one-day rise in nearly seven years. Analysts from Citigroup expect that alumina prices will rebound under the influence of global reduction of production.

It is reported that from ACBNews that on January 13, the ASK share price rose by 11.17%, which made the biggest one-day rise since 2009, and finally closed at $1.095. The overall decline over the past 12 months has reduced to 44%.

The largest U.S. aluminum producer-Alcoa expects that the global alumina supply will be reduced about 2.8 million tons affected by the global output contraction (including Texas, PointComfort smelter will also cut the production) in 2016. A analyst, Clarke Wilkins from Citigroup pointed out in a research record released on January 12, Alcoa World Alumina & Chemicals, also called AWAC has cut the capacity of 3 million tons.

Wilkins says the falling prices result in the reduction in alumina production, which may help the market quickly keep balanced, and promote the spot price rebound. According to the data from Metal Bulletin, the alumina prices fell nearly 42% in 2015.

Alumina is the only listed company in Australia to mine bauxite and process alumina for the main products. Bauxite is a kind of mineral that can be processed into alumina.

In January 2014, Indonesia announced a ban on exports of bauxite, and then China began to try to find alternative source of the supply. With the new project putting into production, Malaysia become the key bauxite source of import except Australia. Chinese customs data show that from January to October 2015, China's total imports of bauxite from Australia and Malaysia, are about 16.4 million tons and 18 million tons respectively; Last year, more than forty percent of bauxite imports is from Malaysia. However, as the government investigates more deeply on the problem of environmental pollution, Pahang-Malaysia's largest bauxite region will face a ban for three months.

According to the latest annual report, Citic Resources possesses 7.8 % equity stakes of Alumina, as the third largest shareholder. AWAC is the world's largest producer of Alumina, has invested many bauxite projects and Alumina refineries in Brazil and western Australia.