The aluminium incentive price – time to take projects off the shelf and blow the dust off
We model generic smelters using a mix of greenfield and brownfield projects. We estimate, based on our Cost Service, their respective capital requirements and long run operating costs. In formulating our view, we use a financial-based model. Given a project’s capex and operating cost, the incentive price for that project is the price that generates a cashflow to provide a specific rate of return, which varies between 8% and 13% according to the location of the project. The average incentive price is the (production) weighted average of all the modelled projects.