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: