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.
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Insight | Mar 2017
Current prices insufficient to trigger aluminium CAPEX
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