According to our latest estimate, the average operating costs of primary aluminium smelters, measured in US dollars, were 1650 dollars/tonne in the first quarter of 2006. For the western countries only this average was 1555 dollars. The table below shows these average production costs. To cover operating costs, capital charges and earn a normal return on equity, the average primary smelter needs a price of around 2062 dollars/tonne FOB plant (ex works) under current conditions. It is clear that if prices fall below 1650 dollars, the average smelter is not covering operating costs. Our assessment is that major cuts in production will occur when prices approach a point 15 percent below the level at which the operating costs of 75 percent of the industry are covered. Under current conditions that is 1643 dollars/tonne. The point at which 80 percent of the industry is covering operating costs, which we consider to be position of the long-term marginal supplier under normal market conditions, is 1962 dollars.
展开▼
