Sunday’s fire which damaged a section of the Jamalco Alumina refinery in Halse Hall, Clarendon, is causing uncertainty in the global market, and sparking concerns that there will be a shortage of the raw material which has pushed aluminium prices near a three-year high.
The fire has caused the refinery, which is Jamaica’s second biggest with production of 1.4 million tonnes of alumina per year, to be shuttered indefinitely, tightening supply of the metal on the global market. This has resulted in the price of aluminium rising from US$2,544 per tonne on August 19 to a 10-year high settlement of US$2,648.50 per tonne on August 24. A global recovery from the first wave of COVID-19-related lockdowns has driven a metals reflation narrative since the beginning of the year.
Caribbean Business Report understands that in addition to the supply slow down caused by the fire at Jamalco, the price for aluminum is also rising on bets that China, the biggest producer, will curb supply to cut emissions.
‘’The shortage of aluminium in the United States has resulted in unprecedented increases in prices and may last up to two years,” major producer of packaging products, Trulite Glass and Aluminum Solutions, told customers in a price notification letter sent out this week.
Metal industry website, mining.com, reports that the blaze at Jamalco has extended the rally in aluminium price. The cost of aluminium has risen more than 50 per cent since January and experts believe it will continue to go up.
Hong Kong-based Noble Group Holdings, which owns 55 per cent of the Jamalco refinery, — Jamaican Government which owns the other 45 per cent through Clarendon Alumina Partners — has admitted that the fire will severely hamper production at the Clarendon plant. It is said that the fire at the plant is expected to push the premium buyers pay for aluminium shipped to the US Midwest to new highs.
The gas-fired Jamalco 150MW power plant was commissioned in March 2020 and also supplies power to the Jamaica Public Service Company. The plant is supplied from US LNG company New Fortress’ terminal on the southern coast that is receiving 200,000 tonnes per year of US LNG.
The shutdown of the Jamalco plant is the second setback to the island’s bauxite refining. Chinese State-owned iron and steel producer Jisco has not yet reopened its 1.6mn tonne per year facility that it closed in September 2019 for upgrading and expansion.
Given the underlining conditions of the world’s aluminum market, Australian investment management firm Shaw and Partners, in a note to the market, on Tuesday advised that, “It is expected that market participants will be focused on the possibility of a disruption to production.”
Noble Group Holdings reported earlier this week that the fire ”broke out in the powerhouse that produces power, compressed air and steam for alumina-refining operations pointing out that “a full assessment of the damage will be done in the coming days.”
Companies in the glass and metal industry are facing price increases once again — this time from aluminium. Several suppliers including Oldcastle Building Envelope (OBE) and Trulite Glass and Aluminum Solutions have sent notices to some customers alerting of an increase in the price for aluminium products. It has been reported that at least one company was notified of an eight per cent increase by each organisation.
OBE released a statement this week saying, “strong demand for aluminium-intensive products and the ongoing global supply chain challenges will continue to put pressure” on the overall cost of aluminium.
Unfortunately, aluminium is not the only thing increasing in price as Trulite Glass and Aluminum Solutions reports that there has been a dramatic increase in the cost for fuel, wood and wages. These increases, the company explained make it necessary for them to implement an eight per cent price increase effective September 6 for all of their aluminium systems and their respective components.