Alumina (ASX:AWC) shines amid refinery closure

In the wake of Alcoa’s ageing Kwinana refinery closure in Western Australia, the JV partner, Alumina Limited, has reported a positive fourth quarter of earnings.

Alcoa Corp (NYSE:AA) has released its quarterly earnings report, which includes information on the AWAC joint venture and Alumina Limited.

According to the report, AWAC reduced its production costs in Q423 by lowering caustic prices and reducing system cash costs from $303 to $291 per tonne.

The quarterly cash cost of production has continued to improve, peaking at $329/t in 2Q23.

Alcoa has recently announced plans to entirely curtail production at the Kwinana alumina refinery in Western Australia in the second quarter of 2024.

This follows an announcement in December 2023 regarding Alcoa’s intention to act at the San Ciprian refinery to reduce losses and work towards a long-term solution.

Excluding the higher cost of San Ciprian and Kwinana refineries, the AWAC system cash cost of production was $263/t in 4Q23, down from $274/t in 3Q23.

The metallurgical alumina market remains in tight supply, compounded by recent production cuts in China.

The company expects the market to remain tight following the Kwinana refinery’s closure.

As a result, the API has rallied by more than $40/t since mid-December 2023 to $370/t on 17 January 2024.

“We are pleased to see the ongoing reduction in AWACS’s cash costs of production in 4Q23,” Alumina Limited’s CEO, Mike Ferraro, said.

“In addition, the recently announced actions at the Kwinana and San Ciprian refineries, reinforced today by Alcoa in its 4Q2023 Results Announcement, illustrate AWAC’s intention to improve the portfolio.

“As a result, AWAC is well placed to benefit from the prevailing tight alumina market and positive long-term outlook for aluminium.”

Alumina Limited retains significant debt capacity within its total debt facility limit of $500m. Net debt on 31 December 2023 was $294.3m.

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