Market views are mixed on whether an estimated 150 million lb/year of scrap recycling capacity to be added at Logan Aluminum is needed to meet overall US recycling demand, or whether it will leave some processors scrambling for business to run their furnaces.

As reported by Platts last week, the ARCO Aluminum/Novelis joint venture Logan Aluminum will build a new recycling center at its Russellville, Kentucky, rolling mill site at a cost of more than $25 million, ARCO announced February 20. This center will require a 70,000-square-foot expansion of Logan's building complex and is expected to be fully operational by January 2008 with a staff of 40 people.

The added recycling capacity will not change Logan's total output, but it will enable the mill to receive and melt its own scrap, consisting of used beverage cans, scrap aluminium siding and scrap from can manufacturing plants. These materials are currently processed elsewhere and are received at Logan in a partially completed form. "The new recycle center will allow Logan to eliminate this two-step process, thus improving production efficiency," the company said.

The expansion, however, is just for ARCO: Novelis will continue to source its raw material from its own facilities. "We have sufficient UBC capacity at our existing recycling facilities" in Oswego, New York; Greensboro, Georgia; and Berea, Kentucky, a Novelis spokesman said.

One can industry source said the additional recycling capacity was probably not in response to a capacity shortfall in the industry. "I don't think the capacity is needed; I think they just want to have more control," he said. Several market players had heard for more than a year that the expansion was coming.

Currently, Logan sources its raw material in the form of molten aluminium, remelt secondary ingot and rolling slab through converters, such as Hunter Douglas, Owl's Head and Scepter Resources, who buy the scrap and toll through their own plants or others, including the nearby Morgantown, Kentucky, plant owned by Aleris.

Alcoa Russia closed 2006 with sales revenue of $800 million, the Russian division of the world's biggest aluminium producer said in materials.

Alcoa Russia consists of two fabrication plants – Samara Metals Plant and Belaya-Kalitva Metallurgical Production Association (BKMPO) (RTS: BMPO) – which the U.S. corporation bought from Russian Aluminium (RUSAL) for $257 million in 2005.

Andrei Bader, the general director of Alcoa Russia, told reporters that the plants were still making losses but planned to break even by the end of 2007.

"We're still a long way off making profits -first we want to break even," he said.

Bader said investment in the Russian units came to just over $100 million in 2006.

"Investments will be a little more than $100 million in 2007 also," Bader said.

Alcoa Russia plans to spend $40 million on a unit to make aluminium for ring pulls and can lids at the Samara plant, $38 million on an Ebner furnace to produce tiles for the aerospace industry at BKMPO and a total of $20 million on cast-house upgrades at both enterprises.

State-owned mining company PT ANEKA TAMBANG (Antam) (JSX:ANTM) said it needs a loan of up to US$70 million to finance development of its chemical grade alumina project in Tayan, West Kalimantan.

Japan Bank for International Cooperation (JBIC) has agreed to provide 60 per cent of the fund needed by the US$250 million project if it is found to be feasible.

* Antam Finance Director Kurniadi Atmosasmito said feasibility studies, now being carried out by ANZ on the project is to be completed next month.
* If the project is feasible, work would start to build it early next year, Kurniadi said last weekend

Russia increased aluminium production 2.1% and nickel 1.4% year-on-year in January, however copper production fell 5.5%, the Federal State Statistics Service (Rosstat) said.

Aluminium production grew due to production optimization, increased alloy production and the commissioning of Russian aluminium giant RUSAL's Khakass smelter. Rosstat said that RUSAL's Sayanogorsk smelter edged aluminium production up 0.6% and the Krasnoyarsk smelter increased it 3.8%. SUAL's Bogoslovsk smelter raised production 0.4%.

Russia's aluminium producers are still prioritizing the external market over the domestic market: Rosstat said that RUSAL's smelters exported something like 81% of their output in January.

Spot prices for aluminium alloy 226 in Europe slipped lower this week, pressured down by abundant scrap levels and softer primary and secondary London Metal Exchange prices. This was despite the recently moderate pick up in spot demand and a trickle of enquiries for second-quarter material, market sources told Platts this week.

Aluminium alloy 226 ingot was mostly heard at Eur1,930-1,960/mt on a delivered German works basis, with 30-day payment terms, shifting down from Eur1,950-2,000/mt a few weeks ago.

Aluminium alloy was last bid at $2,200/mt at 1051 GMT Friday after going untraded Thursday, while primary aluminium was bid at $2,840/mt Friday morning, up $45 from its previous close.

A German trader said the 226 market had been lackluster since the beginning of the year, but over the last few days there had been an increase in spot activity. But he noted that despite this apparent pick up in demand and enquiries, prices had still slid lower. He said 226 prices had dipped Eur50-60/mt in the last few days on the back of abundant scrap levels and a softening in primary and secondary LME prices.

He said the 226 price range was between Eur1,930-1,960/mt on a delivered German works basis, with 30-day terms, and offered prices of Eur2,000/mt "no longer exist."

"If there is a tightening in scrap supply, an increase in LME prices and a big increase in demand, we should see 226 prices climb higher," he said, adding however that such an increase did not seem likely. "Some customers bought too much material in Q4 and have been working off old contracts or stockpiles," he noted.

An Eastern European market source said quotations of Eur1,930-1,960/mt were "probably realistic," but noted that demand was weak and spot activity very thin. "Prices are probably under pressure because the soft winter we have had means there is lots of scrap around," he said, adding that he assumed consumers were running their plants with stockpiled material.

An aluminium alloy buyer said the alloy markets seemed steady and there was no immediate increase in demand expected. "But I have heard that supply of normal scrap is tightening," he said, suggesting that scrap dealers were holding back material in the hope that scrap prices would increase.

Labor negotiations between the United Steelworkers union and UK-based consumer packaging major Rexam, affecting some 900 union workers at 10 of the company's aluminium can sheet plants across the US, are heading toward a Saturday deadline at midnight with a variety of possible outcomes, including a settlement or strike.

"We're very confident we will reach an agreement by the end of the day Saturday" to replace the expiring three-year pact, Rexam spokesman Greg Brooke told Platts late Thursday.

USW spokesman Gerald Dickey was not so certain. "We could extend (the existing accord), get locked out or go on strike," he said.

The two sides appeared to be on the road to settlement before the union's bargaining team issued a more sobering assessment Wednesday. "It is sad to report that Rexam management has shown its true colors, making radical proposals to eliminate cost-of-living adjustments, require active employees to pay excessive costs for health care benefits, and gutting the health care benefits of future retirees," the USW council at Rexam said.

If the company's position does not change, "you will begin to see activity around your plants to prepare for a labor dispute," the council advised. "We didn't come to Albuquerque," where the talks are taking place, "looking for a fight, but we won't run from a fight if that is what management wants."

The union said it entered the talks earlier this month with two primary bargaining goals: good health care benefits for all its members at the affected plants, and a master contract that covers all USW members at Rexam. Unlike in the past, the rank-and-file will get to vote on whether to ratify the Rexam agreement, should one be reached.

According to the union, Rexam wants to keep only eight of the 10 locals under the master agreement.

The USW says the negotiations cover employees at the following locations: Valparaiso, Indiana; Whitehouse, Ohio; Chatsworth, California; Winston-Salem, North Carolina; Bishopville, South Carolina; Oklahoma City, Oklahoma; Phoenix, Arizona; Birmingham, Alabama; St. Paul, Minnesota; and Chicago, Illinois.

Aluminium Bahrain, the largest aluminium smelter in the Middle East, said it needs more supplies of gas or other forms of energy to proceed with a planned $1.7bn expansion to meet rising demand for the metal.

"For expansion we need to find alternative sources" of electricity, chief executive officer Ahmed al-Noaimi said here. "Energy is an issue."

Aluminium Bahrain, or Alba, started production in 1971 using gas from Bahrain's Awali oil field to power its smelter.

Domestic gas supplies aren't sufficient to meet the needs of a planned expansion that would increase annual production to 1.2mn metric tons, from 872,288 tons last year.
Aluminium prices rose to a record $3,310 a ton last May in London as Chinese demand expanded.

That has spurred producers such as Alcan and Norsk Hydro to boost production in Middle Eastern countries where abundant supplies of natural gas are available to power smelters.

Electricity typically accounts for about a third of the cost of producing aluminium, used to make beverage cans, aircraft and window-frames.

"Aluminium demand is set for continued growth and there are some questions as to where supply will come from," said Robin Bhar, a London-based metals analyst with UBS.

"The United Arab Emirates, Qatar and Saudi Arabia are all looking to increase production, so if Bahrain can't get more power its loss would be a gain for other Arab countries."

Norsk Hydro, the world's fourth-biggest aluminium producer, is building a $4.5bn smelter in Qatar with the state's energy company. First production is due in 2009.
Qatar controls the world's largest single natural gas field and by 2012 plans to operate 14 trains producing 77mn tons of liquefied natural gas a year.

Montreal-based Alcan is building a $1.7bn smelter in Oman with Oman Oil and the Abu Dhabi Water and Electricity Authority, with production due to begin in 2008.
Abu Dhabi's Mubadala Development Co and Dubai Aluminium Co are planning to spend $5bn building the world's largest aluminium smelter in the UAE, capable of producing 1.4mn tons a year.

State-controlled Alba in 2005 opened a fifth potline costing $1.7bn and is already exceeding its smelter's 830,000-ton-a-year design capacity. A potline is a series of electrolytic cells that extract aluminium from alumina.

It's working on upgrades to "squeeze" another 60,000 tons from the smelter within three years, according to al-Noaimi, and plans a sixth $1.7bn potline in a "five year horizon".

"Maybe we need to discuss joint ventures to generate power," al-Noaimi said, declining to be more specific on where Alba could secure additional electricity supplies.

Natural-gas prices are more than three times higher than during the 1990s and gas consumption will outpace global energy demand for the next 25 years, according to the Paris-based International Energy Agency.

Alba exports about a third of its production outside the Middle East to buyers in Europe, Asia and the US Global demand for aluminium will grow at about 4% a year for the next decade, the company forecast.

This year will be a "peak year" as aluminium prices range between $2,500 and $2,700 a ton, al-Noaimi said. Prices will fall to between $1,900 and $2,200 a ton in the next four years on new supply, he said, "depending on how much the funds play in the market."

Unless it proceeds with a sixth potline, Alba won't need to borrow for upgrades planned for its Bahrain plant, al-Noaimi said. The company is "preparing" for an initial share sale which he said will probably happen "in the region of five years" from now.

Russia increased aluminium production 2.1% and nickel 1.4% year-on-year in January, however copper production fell 5.5%, the Federal State Statistics Service (Rosstat) said.

Aluminium production grew due to production optimization, increased alloy production and the commissioning of Russian aluminium giant RUSAL's Khakass smelter. Rosstat said that RUSAL's Sayanogorsk smelter edged aluminium production up 0.6% and the Krasnoyarsk smelter increased it 3.8%. SUAL's Bogoslovsk smelter raised production 0.4%.

Russia's aluminium producers are still prioritizing the external market over the domestic market: Rosstat said that RUSAL's smelters exported something like 81% of their output in January.

Russian Aluminium's Sayanal, the country's biggest producer of aluminium foil and foil packaging materials, plans to increase production by 6.5% this year, to 40,800 tonnes from 38,300 tonnes in 2006, managing director Gennady Gamanovich told reporters.

Foil exports will remain at about 59% of output, he said.

The company reported that it aims to invest $6.3 million in its development this year, of which $2.7 million have already been disbursed.

"More than 93% of the allocated money will be spent on equipment updates, and 4.8% on environmental safety issues. We plan to spend no more than 0.2% of the amount on administrative-management expenses," the company said.

Investment in the plant's development totaled $4.9 million last year and $4.7 million in 2005.

Sayanal, which produces about 70% of Russia's aluminium foil, ships its products to over 30 countries and works with about 350 Russian companies.

The plant, which opened in 1995, was built under an agreement between the Sayan Aluminium Smelter, Italian engineering company FATA and the Reynolds Metals Company of the United States. Rusal owns 99.2% of Sayanal.

Century Aluminum Co. on Tuesday posted a slimmer fourth-quarter loss as sales rose 45 percent on stronger aluminium prices.

The company's loss totaled $119.1 million, or $3.67 per share, compared with a loss of $148.7 million, or $4.62 per share, a year earlier. The recent quarter included $5.37 per basic share in charges related to losses on adjustments to forward contracts, while the year-ago quarter included $5.12 per share in similar charges.

Before the losses on forward contracts and early debt retirement, operating income rose to $82.4 million from $24.9 million.

Sales climbed to $424.4 million from $292.9 million in the prior-year period.

On average, analysts polled by Thomson Financial forecast earnings of $1.62 per share on sales of $415.8 million. Analysts typically exclude one-time items.

Century shipped 288.9 million pounds of aluminium in the fourth quarter, down 1 percent from the prior year, but the price per pound jumped to $1.12 from 88 cents in the 2005 quarter.

Century's full-year loss narrowed to $41 million, or $1.26 per share, from $116.3 million, or $3.62 per share, in 2005. Annual sales grew to $1.56 billion from $1.13 billion.

Century shares fell 54 cents to $48.06 in aftermarket activity after finishing up 86 cents to close at $48.60 on the Nasdaq Stock Market.

Costa Rican aluminium processor Alunasa, a subsidiary of Venezuelan state heavy industry holding CVG, may be shut down by Venezuela's President Hugo Chavez because of differences with his Costa Rican counterpart Oscar Arias, press from both countries reported.

The reports said that Chavez was upset by President Arias' statements that the special powers recently granted to the Venezuelan leader were "the antithesis of democracy."

In response, Chavez has reportedly decided to move Alunasa to a different country in Central America and has ordered the immediate suspension of aluminium shipments from Venezuela.

However, the presidential press office in Costa Rica's capital San Jose has not received any official communication and therefore has no comment on the issue, reports said.

Alunasa employees have sent a letter to Arias expressing their concern about the news.

On February 4, Venezuela's national assembly (AN) awarded President Chavez the ability to rule by decree in a wide range of areas via a new enabling bill.

Chavez asked the AN to pass the bill last month, just before being sworn in for a new term of office. However, the extent of the powers granted under the new bill is still unknown.

Alunasa is located in Costa Rica's Puntarenas province and manufactures nearly 9,000t/y of rolled and semi-finished aluminium products with aluminium supplied by Venezuelan company Alcasa, also a CVG subsidiary.

The Industrial and Commercial Bank of China (ICBC) and the China Aluminum have signed an agreement on long-term strategic cooperation.

Under the agreement, ICBC, China's largest lender, will provide comprehensive financial services to the latter including loans, assets management, financing, cash management and debt risks control.

But the ICBC didn't reveal credit line available to China Aluminum, the world's second largest alumina maker and the country's top electrolytic aluminium manufacturer which posted 105.5 billion yuan (about 13.88 billion U.S. dollars) in annual sales revenue and 152.6 billion yuan (about 20.07 billion U.S. dollars) in assets.

With an asset of more than seven trillion yuan, the ICBC boasts 2.5 million corporate clients and 150 million individual clients and holds the largest mainland market share.

The stock market believes the US aluminium giant Alcoa is ripe for a takeover bid. Rio Tinto and BHP Billiton are being named as the likely predators, but watch out for private equity raiders.

Whether the stories are true or false, whoever contemplates buying Alcoa must come to grips with the fact that the jewel in Alcoa is a joint-venture operation, AWAC (Alcoa World Alumina and Chemicals), where the American company owns only 60 per cent. The Australian listed group Alumina Ltd owns the remaining 40 per cent in what is a most unusual corporate structure.

AWAC is the world's largest combined bauxite miner and alumina producer – the first two steps in making aluminium. Bauxite and alumina production is often more profitable than smelting aluminium and rolling final products. Accordingly, in recent times the market has awarded Alumina Ltd a higher price-earnings ratio than Alcoa and substantially higher than either BHP or Rio Tinto.

While on the surface that makes it hard for Rio and BHP to bid for the Australian company, there may be offsetting factors because AWAC has a unique global opportunity.

AWAC owns eight of the world's largest alumina refineries, of which five are in the bottom cost quartile. Better still, in coming years it will be able to increase the capacity of its existing refining operations by about a third from the 2006 level and, because it is adding to base plant, the operating costs (excluding raw materials) of the new capacity will be some 30 per cent below current levels.

At the same time, Alcoa believes with a passion that despite greenhouse, the world's use of aluminium will double between 2005 and 2020. The Australian CEO of Alumina, John Marlay, is totally convinced that Alcoa's future projections are right and so the Australian company is taking up its entitlement to fund 40 per cent of what is the world's largest alumina production expansion.

Rio Tinto and BHP also produce alumina but have been much more restrained.

Australian savers have retained this amazing asset – Alumina – to boost their retirement returns thanks to the long-term strategic investment policies of the late Lindsay Clark, Avi Parbo and Hugh Morgan.

Morgan had to fight the short-term institutional analysts who did not understand how to value the old WMC company correctly, which almost led to Alcoa buying WMC at a price that was nearly as low as the French bid for Axa and the Xstrata takeover of MIM.

The attempt by the Americans to take advantage of Australia's poorly trained analysts forced the board of WMC to split the company into two. BHP later bought the uranium, copper and nickel business at what still turned out to be a low price. But it will be much harder to secure Alumina cheaply because there are now at least a few institutional analysts who have taken the time to understand the company's potential.

Aluminium has been described as "solid electricity" – so why, in a greenhouse/carbon emissions-obsessed world would consumption of aluminium double between 2005 and 2020?

John Marlay believes that aluminium, rather being part of the problem, is "part of the solution". He says that its light weight substantially improves the fuel consumption in the transportation industry and it is a brilliant building and packaging material.

"I think that it is important to realise the embedded energy which is stored within aluminium," he says.

"In 2007 the world will consume about 36 million tonnes of aluminium. One-third of that consumption is actually from recycled aluminium requiring 95 per cent less energy than the first time that it was manufactured as primary metal.

"Over 60 per cent of the aluminium ever produced in the world over the last 80 years is still in use.

"In construction materials you are getting close to 100 per cent recycling. In the automotive sector, it is 90 per cent recycling, and in packaging, depending on the particular economy, it is between 50 and 60 per cent."

Marlay says that the vast majority of new aluminium will come from gas-fired power stations in the Middle East and Russia plus hydro in places like Iceland (Alcoa) and possibly Greenland.

The bulk of AWAC's alumina production is fired by natural gas, which generates processed steam. The group is planning co-generation plants in Australia and elsewhere to use that steam to generate power which will substantially improve its carbon economics. It also owns the two Alcoa aluminium smelters in Australia, in Geelong and Portland, which gain most of their electricity from brown coal.

Any group bidding for Alcoa or Alumina will need to be confident that any future legislation taxing carbon emissions (perhaps via trading) will not stunt the growth of aluminium and leave the world with substantial over-capacity in both aluminium and alumina. China is, of course, leading the demand for aluminium. The country is planning much more investment in dwellings and cars which will propel future demand. The Chinese alumina company, Chalco, is estimated to produce between 9 million and 10 million tonnes of alumina, compared to 14.3 million tonnes by AWAC.

A major Chinese aluminium producer, Chiping Xinfa Huayu Alumina (Xinfa) has elected to excercise its option to acquire 10% of the issued capital in Australian company Cape Alumina, in a A$4.625 million ($3.6 million) deal with Metallica Minerals, said Metallica on Wednesday.

Metallica, which will retain a 40% stake in Cape Alumina after the Xinfa transaction, will receive total payments of A$4.625 million, including the option fee of A$250,000 received on August 24, 2006.

Xinfa on Wednesday will make a second payment to Metallica of A$250,000 and pay the balance of A$4.125 million within 90 days.

Cape Alumina Chief Executive Paul Messenger said: "Cape Alumina's close link with Xinfa may also lead to a major off-take agreement for bauxite eventually produced by Cape Alumina. Xinfa is one of the largest bauxite importers in China, which it uses to feed its Chiping alumina refinery and aluminium smelter complex in Shandong Province, eastern China."

Last year, Xinfa imported about 5 million mt of bauxite, while official statistics show that China imported 9.7 million mt of bauxite in 2006, a figure that is expected to grow further in 2007 and beyond, Metallica said.

Cape Alumina anticipates a number of its other 16 exploration permit applications in Cape York to be granted in the first half of 2007 with exploration drilling program currently being planned and a scoping study into mining, beneficiation and export of bauxite in progress.

Aluminium Corp of China Ltd's (Chalco) planned issuance of 1.24 bln A-shares on the Shanghai Stock Exchange will be positive for the company as a strengthened capital base will support Chalco's credit metrics and streamline upstream and downstream operations for China's largest aluminium and alumina firm, Fitch Ratings said.

"This issuance will raise 8.2 bln yuan to acquire the minority/majority stakes in its two mainland listed units – Shandong Aluminium and Lanzhou Aluminium. We view the mergers positively, as they will provide improved integration between the firm's upstream bauxite, refining and downstream smelting operations, underpinning its leading position in the industry's consolidation process," Fitch said in the research note.

Fitch said Chalco has taken steps to expand its downstream primary aluminium production capacity by mergers and acquisitions in recent years, with its output of primary aluminium reaching around 1.8 mln tons in 2006, representing an increase of more than 230 pct compared to 2003.

"Chalco's increasing exposure to its downstream primary aluminium operations has benefited the company, supporting stable revenue growth notwithstanding a declining alumina price," said Danny Chen, associate director of Fitch's Corporate ratings team in Beijing, in the note.

Looking ahead, Chalco aims to buy three more smelters – Baotou Aluminium, Liancheng Aluminium and Tongchuan Xinguang Aluminium – from its parent, and hence will expand its primary aluminium capacity to 3.4 mln tons in 2007, representing a 25 pct increase year-on-year and accounting for around 35 pct of the Chinese domestic market, the note added. In the refining sector, China's domestic production capacity of alumina accelerated in 2006 and the increasing supply negatively impacted the spot price of alumina.

To maintain its competitiveness in the Chinese market, Chalco has announced four consecutive price cuts since August 2006 and sequentially lowered its contract price of alumina by 57.5 pct to 2,400 yuan per ton from a historical high of 5,650.

With more domestic production capacity of alumina coming on-stream, Chalco's monopoly position in the supply of alumina will be further weakened, which may see its market share falling from 90 pct in 2005 to around 55 pct in 2007.

ix months after hammering out an agreement for lower-cost electricity, Alcoa Inc.'s Intalco Works aluminium smelter in Ferndale has started operating its second aluminium-producing potline.

The 40-year-old Ferndale smelter is operating at two-thirds capacity, with two of its three aluminium-producing potlines now running. Electricity costs to power the smelter were lowered last year when Pittsburgh-based Alcoa (NYSE: AA – News) worked out a deal with the Bonneville Power Administration. Alcoa employs about 575 people at the site, as well as 200 contractors. The smelter has not operated two potlines at the Whatcom County facility since April 2003, with only one operating since then.

"This plant has had a turbulent history but the restart offers us all stability and a platform for a secure future," said Mike Rousseau, plant manager, in a statement.

International Aluminum Corp., which makes aluminium and vinyl building products, on Monday posted a flat second-quarter profit, weighed by a charge related to an expected legal settlement.

Income for the October-December period totaled $3.6 million, or 84 cents per share, compared with $3.6 million, or 83 cents per share, a year earlier. Revenue rose 16 percent to $76.1 million, from $65.7 million, a year ago.

The company said its latest results were hurt by a $1 million pretax charge related to costs to settle an employment related lawsuit.

Shares of International Aluminum (nyse: IAL) dropped 16 cents to $52.16 in afternoon trading on the New York Stock Exchange.

Venezuelan aluminium reducer Alcasa posted a 4.6% drop in production in 2006 to 178,124t, down from 186,707t in 2005.

Alcasa also reached record metal purity of 99.1% on its production line 4 in January 2007, a quality not achieved since February 2000, the company said in a statement.

At production line 3, the company managed metal purity of 73%, while reaching 97.1% and 85.7% at lines 1 and 2 respectively, the report said.

Alcasa is located at Puerto Ordaz in eastern Venezuela. The company is 92% owned by state heavy industry holding CVG while the remaining 8% belongs to US company Alcoa (NYSE: AA).

Aluminium is the world’s most abundant metal and is the third most common element, comprising 8% of the earth’s crust. The versatility of aluminium makes it the most widely used metal after steel. Although aluminium compounds have been used for thousands of years, aluminium metal was first produced around 170 years ago. In the 100 years since the first industrial quantities of aluminium were produced, worldwide demand for aluminium has grown to around 29 million tons per year. About 22 million tons is new aluminium and 7 million tons is recycled aluminium scrap. The use of recycled aluminium is economically and environmentally compelling. It takes 14,000 kWh to produce 1 tonne of new aluminium. Conversely it takes only 5% of this to remelt and recycle one tonne of aluminium. There is no difference in quality between virgin and recycled aluminium alloys. Pure aluminium is soft, ductile, corrosion resistant and has a high electrical conductivity. It is widely used for foil and conductor cables, but alloying with other elements is necessary to provide the higher strengths needed for other applications. Aluminium is one of the lightest engineering metals, having a strength to weight ratio superior to steel. By utilising various combinations of its advantageous properties such as strength, lightness, corrosion resistance, recyclability and formability, aluminium is being employed in an ever-increasing number of applications. This array of products ranges from structural materials through to thin packaging foils.

Properties

The major advantages of using aluminium are tied directly to its remarkable properties. Some of these properties are outlined in the following sections. Strength to Weight Ratio Aluminium has a density around one third that of steel and is used advantageously in applications where high strength and low weight are required. This includes vehicles where low mass results in greater load capacity and reduced fuel consumption. Corrosion Resistance When the surface of aluminium metal is exposed to air, a protective oxide coating forms almost instantaneously. This oxide layer is corrosion resistant and can be further enhanced with surface treatments such as anodising. Electrical and Thermal Conductivity Aluminium is an excellent conductor of both heat and electricity. The great advantage of aluminium is that by weight, the conductivity of aluminium is around twice that of copper. This means that aluminium is now the most commonly used material in large power transmission lines. The best alternatives to copper are aluminium alloys in the 1000 or 6000 series. These can be used for all electrical conduction applications including domestic wiring. Weight considerations mean that a large proportion of overhead, high voltage power lines now use aluminium rather than copper. They do however, have a low strength and need to be reinforced with a galvanised or aluminium coated high tensile steel wire in each strand. Light and Heat Reflectivity Aluminium is a good reflector of both visible light and heat making it an ideal material for light fittings, thermal rescue blankets and architectural insulation. Toxicity Aluminium is not only non-toxic but also does not release any odours or taint products with which it is in contact. This makes aluminium suitable for use in packaging for sensitive products such as food or pharmaceuticals where aluminium foil is used. Recyclability The recyclability of aluminium is unparalleled. When recycled there is no degradation in properties when recycled aluminium is compared to virgin aluminium. Furthermore, recycling of aluminium only requires around 5 percent of the input energy required to produce virgin aluminium metal. Aluminium Production Aluminium is extracted from the principal ore, bauxite. Significant bauxite deposits are found throughout Australia, the Caribbean, Africa, China and South America. Open cut techniques are commonly used to mine the bauxite. The bauxite is purified using the Bayer process. This process involves dissolving aluminium trihydrate to leave alumina plus iron and titanium oxides. The iron and titanium oxides are by-products of the process and are often referred to as ‘red mud’. Red mud must be disposed of with strong consideration given to environmental concerns. Approximately two tonnes of bauxite are required to yield one tonne of alumina. Smelting The extraction of aluminium from alumina is achieved using an electrolytic process. A cell or pot is used that consists of a carbon lined steel shell. This shell forms a cathode. A consumable carbon anode is suspended in liquid cryolite (sodium aluminium fluoride) held within the pot at 950°C. Alumina is dissolved in the cryolite by passing low voltages at high amperages through the pot. This results in pure aluminium being deposited at the cathode. Environmental Considerations The aluminium industry is very conscious of the environmental impact of its activities. The mining and smelting of aluminium, plus the disposal of red mud can have a major environmental impact if not done properly. The industry is proud of its efforts and achievements in rehabilitating open cut mine sites and the restoring flora and fauna to these sites. Such efforts have been rewarded with awards from the United Nations Environment Programme and red mud disposal areas are now being successfully revegetated. Environmental requirements are met on pot line emissions through the use of specialist scrubbing system. Recycling The combination of two remarkable properties of aluminium makes the need to recycle the metal obvious. These first of these factors is that there is no difference between virgin and recycled aluminium. The second factor is that recycled aluminium only uses 5% of the energy required to produce virgin material. Currently around 60% of aluminium metal is recycled at the end of its lifecycle but this percentage can still be vastly improved. Applications The properties of the various aluminium alloys has resulted in aluminium being used in industries as diverse as transport, food preparation, energy generation, packaging, architecture, and electrical transmission applications. Depending upon the application, aluminium can be used to replace other materials like copper, steel, zinc, tin plate, stainless steel, titanium, wood, paper, concrete and composites. Some examples of the areas where aluminium is used are given in the following sections Packaging Corrosion resistance and protection against UV light combined with moisture and odour containment plus the fact that aluminium is non-toxic and will not leach or taint the products has resulted in the widespread use of aluminium foils and sheet in food packaging and protection. The most common use of aluminium for packaging has been in aluminium beverage cans. Aluminium cans now account for around 15% of the global consumption of aluminium. Transport After the very earliest days of manned flight, the excellent strength to weight ratio of aluminium have made it the prime material for the construction of aircraft. These same properties of aluminium mean various alloys are now also used in passenger and freight rail cars, commercial vehicles, military vehicles, ships & boats, buses & coaches, bicycles and increasingly in motor cars. The sustainable nature of aluminium with regards to corrosion resistance and recyclability has helped drive the recent increases in demand for aluminium vehicle components. Marine Applications Aluminium plate and extrusions are used extensively for the superstructures of ships. The use of these materials allows designers to increase the above waterline size of the vessel without creating stability problems. The weight advantage of aluminium has allowed marine architects to gain better performance from the available power by using aluminium in the hulls of hovercraft, fast multi-hulled catamarans and surface planing vessels. Lower weight and longer lifecycles have seen aluminium become the established material for helidecks and helideck support structures on offshore oil and gas rigs. The same reasons have resulted in the widespread use of aluminium in oil rig stair towers and telescopic personnel bridges. Building and Architecture Aluminium use in buildings covers a wide range of applications. The applications include roofing, foil insulation, windows, cladding, doors, shop fronts, balustrading, architectural hardware and guttering. Aluminium is also commonly used as the in the form of treadplate and industrial flooring.

Alcoa Engineered Products (AEP), innovation leader in the aluminium industry, is introducing ACC-U-BAR, a premium, high-performance extruded square and rectangular bar product. AEP announced today that it will add ACC-U-BAR to its family of branded bar products. ACC-U-BAR will be available in the 3rd quarter of 2004. AEP is a leading supplier of extruded aluminium products to the distribution, commercial transportation, industrial and consumer markets.

ACC-U-BAR was developed for applications requiring tighter tolerances and reduced twist such as the telecom and manifold bar markets. ACC-U-BAR features superior machinability and straightness and represents the next generation of precision bar products for AEP. "Expanding the AEP family of tight tolerance, superior machining, branded products was in direct response to our customer's need for improved productivity and reduced waste in machining operations," said Jay Grissom, Product Manager. "Interest in ACC-U-BAR has already exceeded our expectations."

An Indian conglomerate is considering a multibillion bid for aluminium products maker Novelis Inc., according to Indian news reports.

Novelis in late Friday trading confirmed that it is holding talks involving a potential sale of the company. Shares jumped 24 percent on the news, though the company did not name any possible buyers and said it cannot make any assurances that a transaction will occur.

Indian newspapers say Aditya Birla group could pay $5 billion to $6 billion for the Atlanta based company.

JPMorgan Securities Inc. analyst Michael F. Gambardella in a client note dated Friday upgraded Novelis to "Neutral" from "Underweight" on the confirmed takeover talks.

Aluminium prices edged lower on news labour unions in Guinea had opted to end a two-and-a-half week strike that had disrupted bauxite exports.

Bauxite is a raw material used in the production of alumina, the raw material used to make aluminium.

At 1.08 pm, LME aluminium for three-month delivery was down at 2,728 usd a tonne against 2,795 usd at the close yesterday.

Newswire reports over the weekend said labour unions in the African state had reached an agreement with the government to end their 18-day strike. Work has since resumed at mines and plants across the country.

BNP Paribas analyst David Thurtell said the news could be pressuring aluminium today.

Overall, however, he remains positive on prospects for the metal.

"(Aluminium) hasn't had the same phenomenal (price) rises as some of the other metals therefore it won't see the same supply response" that is being seen in metals like zinc, nickel and copper, he said.

Producers of these metals are expected to increase their production capacity over the next couple of years in a bid to cash in on historically high prices.

Separately, aluminium continues to benefit from the fact that one market player is still holding a dominant position that could potentially see the withdrawal of nearly all the LME's inventory.

"The situation for aluminium remains constant with a dominant player still very much dictating market movement," said Standard Bank analyst Michael Skinner.

The holder of the dominant position has gone long or placed bets that prices will rise. If he chooses at the next settlement day to close out his positions and take delivery, LME aluminium stocks will be nearly depleted.

On the other hand, if he chooses to roll forward his position, the market will still be tight for the next few months as the player gradually unwinds his position or closes out his bets.

Skinner said it looks as though the 3,000 usd level is within sight for aluminium, but added that previous tests at the level have had limited success.

He noted too that the significant premiums being paid for the cash metal over the three month futures price reflects the the tight supply conditions in the market.

The premium has been standing roughly at around 110 usd a tonne today. Two weeks ago the cash premium for aluminium hit 120 usd – the highest its been since 1990.

The first major South African mining dispute of 2007 may turn into a long and bitter strike that could cost Anglo Platinum millions of dollars and valuable ounces in lost production.

Angloplats and its black empowerment partner, African Rainbow Minerals, admitted that the first four days of the strike by at least 2,500 workers at their Modikwa plant near Mokopane in Limpopo had cost the companies 20,000 oz worth Rand 20 million ($2.73 million) in lost production. Members of the National Union of Mineworkers plan a mass meeting and picket at the Modikwa mine in support of their wide ranging claims for better pay and conditions.

But late night talks broke down and the NUM confirmed this morning that no fresh negotiations were on the horizon.

Frans Baleni, the secretary general of the NUM, said that progress had been made on the issue of a transport allowance for mineworkers so that they could choose not to live in hostels. However, Baleni admitted that demands to close the wage gap between blacks and whites and for a shut down of the Modikwa mine on Sundays had made little progress.

"The feedback I am getting from my people in the negotiations is that the company appears not to be serious about resolving this dispute," he said.

Simon Tebele, the spokesperson for Anglo Platinum, confirmed that talks had broken down and were unlikely to start up again soon.

"It seems that the outstanding issue is "conops" (continuous operation) the owners cannot agree to a closure on Sundays. They argue that the mine was designed for continuous operation and feel this is how it should work," he said.

Earlier talks had agreed a 7% pay increase at Modikwa, but racial tension sparked the strike. The stumbling block was the long standing unrest over difference in pay for white workers and black workers, which is as much as Rand6,000/month in some cases according to the NUM.

The spark was a racial dispute that developed when two junior managers were found to have sent an e-mail, berating their black colleagues, to a former co-worker now living in Australia. Management suspended two workers this week pending an investigation.

Aluminium and other base metal markets are seeing a growing number of traditional and non-traditional players using complex trading and hedging strategies for their international investors, according to Craig Tuckman, managing director of Merrill Lynch Commodities. Those strategies, as well as the growing number of "new" players, are likely to result in more price volatility.

In addition to trend-following funds such as Commodity Trading Advisors, index funds, with more than $150 billion invested in commodities, and private equity funds, are using increasingly complex strategies to generate returns for investors. Other new players include investment banks managing risks for their investors and investor funds doing fundraising for mining equities, he said.

"Understand that this is going to have an impact on day-to-day liquidity," Tuckman said during the Platts Aluminium Symposium 2007 conference in Scottsdale, Arizona.

Other examples of non-traditional players and activity include global diversified miners who may look to extend the life of a particular mine by locking in margins on lower-grade ore recoveries, and precious metals producers who have hedged a significant amount of their base metals production to monetize value at relatively high costs, he said.

If these players holding warrants were to liquidate their positions, "it could create greater cash flow volatility...and could impact the Midwest [Platts] premium," Tuckman said. "There's less metal available, which could create spikes in the premium."

The aluminium market would also be affected if trading went completely electronic, Tuckman said. "We could see aluminium go the way of foreign currency exchange, with a 24-hour trading cycle using electronic trading systems that banks provide," he said,

The number of "new" players using complex trading strategies is likely to create not only greater trading price volatility but also increased trading outside of traditional futures. "We could see investors investing in not only cash and three-months [contracts] but also spreads and options. It can distort the fundamental equation in the market a lot," Tuckman said.

A senior official with US aerospace giant Boeing urged aluminium suppliers Tuesday to bring additional rolling plate capacity online so the company could meet its expected aircraft demand. "This [aluminium] industry is a key component to our success. There's no doubt about it," said Brian Schmidt, raw materials strategist for Boeing Commercial Airplanes.

"We rely on you a great deal. Growing this capacity is critical to our long-term success. If we're going to build all those planes, we've got to raise capacity," Schmidt said during a presentation at the Platts Aluminium Symposium 2007 conference in Scottsdale, Arizona. "We need more rolling capacity."

More rolling capacity is needed, Schmidt said, in part because Boeing has over the past 10 years moved more towards monolithic design rather than sheet metal build-up to plate because of its higher-quality, longer lasting, and lighter weight characteristics. "The market is demanding that we move in that direction."

Schmidt noted that lead times in the aluminium industry currently average about 26 weeks. "That puts my production at risk. I have to manage that risk." If a heat treatment or compressing mill went down, Boeing's aircraft production would be affected. "We need your help to bring more capacity on line," he said.

Boeing plans to roll out its new 787 Dreamliner in late June. The company has 36 announced customers for more than 450 aircraft, Schmidt said. The aircraft will replace Boeing's older 757 and 767 jetliners now at the end of their service life.

Though the 757 and 767 are considered aluminium aircraft, the aluminium content in the 787 will equal or exceed that of the older aircraft. And while the Dreamliner will be built with composites as well as aluminium, "there is still a significant amount of demand for aluminium in this plane."

Schmidt assured suppliers that composites would not be used in lieu of aluminium. "Aluminium is the optimal material for our aircraft," he said. Moreover, the development of second- and third-generation alloys look promising.

"We continue to recommend and encourage you to develop those, qualify those as quickly as possible, and make those as cost-competitive as you possibly can to meet the challenge that other commodities are bringing online," he said.

Alcan Inc., the Canadian aluminium supplier and bauxite miner, said Wednesday it swung to a profit in the fourth quarter on higher aluminium prices and sharply lower restructuring charges.

Alcan, based in Montreal, reported net income of $422 million, or $1.13 per share. The latest quarter included a gain of $97 million, or 26 cents per share, related to foreign currency conversion, offset by charges of $85 million, or 23 cents per share, for restructuring and asset impairment.

Operating earnings, which exclude certain items but do include a 17-cent charge to adjust the values of derivatives, were $1.09 per common share compared with $0.54 a year earlier.

Analysts polled by Thomson Financial were looking for earnings of $1.28 per share. Analyst estimates typically exclude one-time items.

A year ago, the company posted a loss of $361 million, or 98 cents per share. That period included restructuring and impairment charges of $533 million.

Fourth-quarter revenue rose 23 percent to $6.22 billion from $5.05 billion in 2005, mainly on higher aluminium prices, which jumped to $2,631 per ton from $1,942 per ton.

Shares of Alcan fell 56 cents, or 1 percent, to $50.27 in morning trading on the New York Stock Exchange. The stock has traded in a 52-week range of $37.42 to $59.20.

Aluminium Corp of China Ltd's (Chalco) planned issuance of 1.24 bln A-shares on the Shanghai Stock Exchange will be positive for the company as a strengthened capital base will support Chalco's credit metrics and streamline upstream and downstream operations for China's largest aluminium and alumina firm, Fitch Ratings said.

"This issuance will raise 8.2 bln yuan to acquire the minority/majority stakes in its two mainland listed units – Shandong Aluminium and Lanzhou Aluminium. We view the mergers positively, as they will provide improved integration between the firm's upstream bauxite, refining and downstream smelting operations, underpinning its leading position in the industry's consolidation process," Fitch said in the research note.

Fitch said Chalco has taken steps to expand its downstream primary aluminium production capacity by mergers and acquisitions in recent years, with its output of primary aluminium reaching around 1.8 mln tons in 2006, representing an increase of more than 230 pct compared to 2003.

"Chalco's increasing exposure to its downstream primary aluminium operations has benefited the company, supporting stable revenue growth notwithstanding a declining alumina price," said Danny Chen, associate director of Fitch's Corporate ratings team in Beijing, in the note.

Looking ahead, Chalco aims to buy three more smelters – Baotou Aluminium, Liancheng Aluminium and Tongchuan Xinguang Aluminium – from its parent, and hence will expand its primary aluminium capacity to 3.4 mln tons in 2007, representing a 25 pct increase year-on-year and accounting for around 35 pct of the Chinese domestic market, the note added. In the refining sector, China's domestic production capacity of alumina accelerated in 2006 and the increasing supply negatively impacted the spot price of alumina.

To maintain its competitiveness in the Chinese market, Chalco has announced four consecutive price cuts since August 2006 and sequentially lowered its contract price of alumina by 57.5 pct to 2,400 yuan per ton from a historical high of 5,650.

With more domestic production capacity of alumina coming on-stream, Chalco's monopoly position in the supply of alumina will be further weakened, which may see its market share falling from 90 pct in 2005 to around 55 pct in 2007.

Fitch expects the primary aluminium business to provide more than 60 pct of Chalco's revenues in 2007, compared with 35 pct in 2005.

Last week, Chalco raised spot prices for alumina by 50 pct to 3,600 yuan per ton, effective immediately, citing upside price pressure from its competitors.

Alumina Ltd said the outlook for alumina and aluminium prices will be driven by demand in China with market fundamentals for aluminium robust, although some oversupply is expected to continue in the alumina market.

Chief executive John Marlay said the scaling back of high cost refinery production in the Western world has seen alumina supplies ease from mid 2006 levels but the market's outlook remains dependent on the rate in which China's scales up domestic production.

"We believe the aluminium market is very robust and strong but there are some issues around alumina," Marlay told a media briefing.

He was speaking after the company reported a 62 pct rise in 2006 net profit to a record 511 mln aud, reflecting strong demand for aluminium and fixed-price sales of alumina. Alumina Ltd expects Chinese domestic demand for aluminium to grow by at least 14 pct this year with growth in western countries seen at about three pct.

Aluminium markets are expected to be balanced to potentially short, while alumina markets are expected to be in an oversupply of between 1.5 to 3.0 mln tons.

The Alcoa Inc, managed Alcoa World Alumina Chemical joint venture (AWAC), which is 40 pct owned by Alumina, expects to lift sales in 2007, principally to supply Alcoa's new Iceland smelter, scheduled to start up the second quarter of 2007. Alcoa said AWAC's 2007 production will increase with its expanded Pinjarra refinery in Western Australia operating at full expanded capacity, the commissioning of the Jamalco refinery upgrade in Jamaica, and some increased capacity at other refineries.
See also: