Hydro Would Like to See a Shift in the Pricing of Bauxite and Alumina

"The future pricing of bauxite and alumina should reflect the fundamentals of the value chain," Executive Vice President Johnny Undeli said in Metal Bulletin's Bauxite and Alumina Conference in Miami this week.

Undeli, head of Hydro's Bauxite & Alumina business area, and several of his colleagues from the business area's commercial department participated for the first time in a major industry conference since the closing of the deal with Vale.

PARAGOMINAS: Johnny Undeli, head of Hydro's Bauxite & Alumina business area, visited the Paragominas bauxite mines a few days after the formal takeover of Vale's aluminium activities in Brazil on February 28. (Photo: Halvor Molland)

The acquisition of the bauxite and alumina assets in Brazil has made Hydro one of the major players in the mining industry, and Undeli was one of the keynote speakers in the conference.

Shift in pricing model
He pointed out that Hydro would like to see a shift in the bauxite and alumina pricing model. Rather than the current model, which more or less follows the aluminium price on the London Metal Exchange (LME), Undeli says Hydro would prefer a model which mixes LME, index pricing and, to a larger degree, the costs in the bauxite and alumina value chain.

Undeli emphasized that there will be an increasing fight for cost-efficient resources going forward and that Hydro with its Brazilian assets is well positioned. The company is now fourth in the world in terms of alumina volume brought to market. This position will grow stronger after planned expansions in Brazil.

Further develop the industry
He pointed out that the alumina market is consolidating and that Hydro intends to actively take part in the further development of the industry.

He also presented Hydro's bauxite and alumina assets in Brazil.

"Short term, our main ambition is to increase capacity utilization in the mining operations in Paragominas and in the Alunorte alumina refinery," said Undeli. "We will have a strong focus on operational excellence in close cooperation with our several thousand employees in Pará."

Will increase production
"The first step is to increase production in Alunorte, the world's largest alumina refinery, from 5.8 million metric tons in 2010 to 6.3 million mt, which is the volume the plant was designed for. In Paragominas, one of the world's largest bauxite mines, we see an urgent need for increasing the production from 7.5 million mt in 2010 to 10 million mt," he said.

He said Hydro will over the longer term continue developing the plans for further expansion of the mining operations in Paragominas to 15 million mt and also establishing the new CAP alumina refinery in Barcarena.

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