Aluminium smelter cuts: who will blink first?

Even before the coronavirus outbreak, aluminium companies were conducting asset reviews when the LME price was struggling to break through US$1,800/t. Despite the deteriorating price environment, ROW smelters maintained an upward output trajectory in Q4 2019. This was driven by restarts in Brazil and Canada coupled with an expansion in Bahrain. Despite low alumina prices, margins were getting crushed at US$1,700/t but smelters were not uncomfortably in the red to make difficult decisions to cut output. The rapidly falling aluminium price is now cutting deeper into the cost curve, forcing the industry to curtail production. In this insight, we look at the potential candidates for closures.