Australian aluminium too expensive

The Australian aluminium industry is becoming less cost competitive as new countries enter the market with cheaper smelters, according to recent research.

AME Mineral Economics said Australia has fallen from being in the top ten in terms of cost competitiveness in 2000 to around 15th from a total of 37 countries active in the aluminium market.

An appreciating Australian dollar is also impacting on the cost of producing aluminium in Australia as are rising electricity prices.

Australia is not the only country battling with power pricing with many smelters already forced to close, or reassess expansion plans, in Western Europe and North America.

Most new capacity has been built in developing countries with immature electricity markets such as Mozambique and Brazil and the trend will continue, AME predicted.

The cost of producing aluminium has also been pushed higher by the price of alumina, which has risen in price along with most other commodities.

There has been a massive supply shortage which has driven up the price and the spot market has gone up threefold whereas the price of aluminium has only gone up 35%.

The global market for aluminium is set to grow by an annual 4.8% a year over the next five years to 39 million tonnes by 2009 with China accounting for more than a quarter of the growth.

Australia's production is set to outstrip that rate, forecast to increase by 8% over the next four years.