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Current prices insufficient to trigger aluminium CAPEX


Current prices insufficient to trigger aluminium CAPEX

Report summary

Wood Mackenzie routinely reassesses the long run alumina and aluminium incentive prices, which are the minimum prices needed to make investment in new capacity economically viable. In formulating our view of long run alumina and aluminium prices, we move away from supply-demand-inventory style analysis and use a financial-based model, using discounted cash flow and internal rate of return (IRR) to determine the equilibrium incentive price. In line with conventional economic theory, we assume that in the long run the alumina and aluminium markets are in equilibrium.

What's included?

This report includes 1 file(s)

  • Current prices insufficient to trigger aluminium CAPEX PDF - 333.35 KB 7 Pages, 2 Tables, 8 Figures

Description

This Metals Insight report highlights the key issues surrounding this topic, and draws out the implications for those involved.

For industry participants and advisors who want to look at the trends, risks and issues surrounding this topic, this report gives you an expert point of view to help inform your decision making.

Our analysts are based in the markets they analyse and work with high-quality proprietary data to provide consistent and reliable insight.

We provide unique in-depth analysis of the metals supply industry so you can make confident strategic decisions.

  • Some refinery costs have become embedded but overall costs declined
  • Assumptions used to construct incentive prices
  • We employ the following core assumptions:

In this report there are 10 tables or charts, including:

  • Some refinery costs have become embedded but overall costs declined
    • Alumina prices will have to increase in the future to trigger investment in alumina refinery
    • Some of the increase in refinery energy costs over the years became embedded
    • Current prices insufficient to trigger aluminium CAPEX: Image 5
    • China still carries the lowest capital intensity
    • Smelter capital intensity outside of China, 1980-2020 (US$/t installed capacity)
    • Aluminium prices need to increase to trigger investment but to levels below historical averages
    • Efficiency and productivity gains meant little embedded costs in aluminium production
  • Assumptions used to construct incentive prices
  • We employ the following core assumptions:
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