High shipping costs due to pandemic blow hole in Alumina’s earnings
High shipping costs will hit earnings at Australia’s biggest alumina exporter, Alumina, until next year.
High shipping costs will hit earnings at Australia’s biggest alumina exporter, Alumina, until next year, as the coronavirus pandemic drives up the cost of moving the nation’s resources riches offshore.
The impact of the pandemic on the shipping industry means the cost of exporting the raw material to international customers has blown out from a 10-year average of about $US19 a tonne to about $US50 a tonne, with the high freight cost likely to last until the pandemic threat recedes, according to Alumina boss Mike Ferrarro.
Alumina reported its half-year financial results on Tuesday, saying rising shipping costs were a major factor in a lower half-year result, which came despite rising prices for both alumina and aluminium in the period.
Alumina will pay a US3.4c a share dividend after a commodity price recovery in the first half of 2021, but its half-year net profit fell 19 per cent to $US73.6m.
Mr Ferrarro said he expected demand for aluminium to continue to strengthen through the rest of the year as major industrial economies recover from the coronavirus pandemic.
The company owns 40 per cent of Alcoa World Alumina & Chemical, and Alumina said the Alcoa assets had hit record alumina and aluminium output in the first half of the year, although the company said rising prices were offset by high freight costs – with the margin for AWAC’s alumina refineries down $US60 a tonne in the half, largely due to rising on rising shipping costs.
Rising oil prices were a major contributor to the increase, Mr Ferrarro said.
The impact of the pandemic on the crew of vessels plying international trading routes, late harvests in Brazil and Western Australia, as well as shortages of shipping containers at major outbound ports all contributing to a perfect storm for the shipping industry, particularly in the smaller “handy size” bulk carriers used to transport alumina.
“The trade dispute between Australia and China and other countries had an impact because shipping is going in different directions now, rather than the backwards and forwards that they were going,” he said.
“It’s sitting at around $US50 a tonne at the moment or just over. Until the Covid-19 impacts disruptions are largely resolved, only then will you see a normalisation of those freight rates again.”
AWAC booked earnings before interest, tax, depreciation and amortisation of $US464.8m for the half, down $US42.8m, Alumina said.
Alumina company declared a US3.4c a share interim dividend, up from US2.8c a share in the first half of 2021.
Alumina shares closed up 3c, or 1.8 per cent on Tuesday, at $1.68.