Alumina and aluminium prices must rise to prevent crunch Report

Insight 19 June 2014

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Report summary

Wood Mackenzie routinely reassesses the long run incentive price, which is the minimum price needed to make investment in new capacity viable based on a rate of return of 15%. The assessment takes into account changes in operating and capital costs, and the extent to which these have become embedded. We now estimate that the incentive price for alumina is US$370/t, while that of aluminium is $2380/t.

Executive summary
Operating costs outpace prices
Capex continues to rise for both smelters and refineries
- Long run equilibrium prices and price forecasts suggest crunch potential
Rationale, risks and IRR methodology
Assumptions used to construct incentive prices

Tables and charts

This report includes 8 images and tables including:

Raw material, electricity, energy and alumina prices, 2000-2013, 2000=100
Raw material, electricity and aluminium prices, 2000-2013, 2000=100
Percentage of LME linked power tariffs in total costed supply

Weighted average refinery and smelter margins as percentage of price, 1984-2013
Refinery capital intensity outside of China, 1980-2019 (US$/t installed capacity)
Smelter capital intensity outside of China, 1980-2019 (US$/t installed capacity)
Historical and equilibrium alumina prices (2014 US$/t alumina)
Historical and equilibrium aluminium prices (2014 US$/t aluminium)