Alumina boss Mike Ferraro says Victoria’s Portland smelter is not for sale
High aluminium prices helped Victoria’s ageing Portland smelter to a strong first half result, with its costs protected by new energy contracts.
Victoria’s Portland aluminium smelter is not for sale, according to Alumina Ltd boss Mike Ferraro, after the ageing facility booked improved earnings of $US59.8m in the first half of the year on the back of lower power costs.
Speaking after Alumina declared a $US4.2c a share interim dividend after the company booked a net profit of $US167.9m profit for the first half of 2022, Mr Ferraro would not comment on reports that Dutch aluminium producer Aloft had made an offer for Portland, but said its owners were not currently looking for a buyer.
“Right now it’s not for sale,” he said.
Alumina owns a stake in Portland through its 40 per cent holding in Alcoa World Aluminium and Chemicals business, which in turn owns 55 per cent of Portland.
Locking in a new lower-cost power deal for Portland in late 2021 helped the smelter to half-year earnings before interest, tax, depreciation and amortisation of $US59.8m, up 23 per cent compared to the first half of 2021, despite the energy crisis that hit the east coast power grid early in winter.
While Portland’s power pricing has not been formally disclosed, the extent of the likely savings were made clear in Alumina’s half-year accounts, with the company recording a $US121m pre-tax gain on the fair value of the energy contracts.
High aluminium and alumina prices in the first half of the year boosted the returns from Alumina’s holding in Alcoa World Aluminium and Chemicals business, with the company taking $US162m in distributions from the aluminium giant, up 18 per cent from the first half of 2021.
Excluding the Portland gains and other one-off items, Alumina said its net profit was $US119.6m for the half, up 73 per cent on the previous year.
Mr Ferraro said that, while record aluminium prices had buoyed Portland’s results, AWAC’s alumina refineries were hit by rising costs in the first half of the year, as well as falling prices in the company’s key markets due to the Australian government’s decision to put sanctions on the export of the product to Russia.
That, along with Rio Tinto’s decision to take full control of its Australian joint venture with Russian aluminium giant Rusal, had meant that alumina originally destined for Rusal’s own aluminium refineries had instead been sold into Asian markets, forcing down prices.
“So all of a sudden you had something like 1.4 million tonnes of alumina that would otherwise go to Russia being sold to the Pacific and into the Asian markets, in competition with our product,” he said.
“And so that caused a dramatic drop in the alumina price. And what we’ve seen instead is high cost producers in China, who probably wouldn’t be producing, have stepped up and are now supplying alumina to Russia.”
Alumina received an average of $US398 per tonne for its product in the first half of the year, the company said, but alumina has since fallen to about $US330 a tonne.
Alumina said AWAC’s average costs of production lifted $US74 a tonne in the first half of the year, compared to the first six months of 2021, but high prices meant the company’s average margins lifted $US34 a tonne, to $US94 a tonne.
Alumina shares closed up 0.5c to $1.51 on Tuesday.
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout