Rio Tinto Alcan Chief Executive Officer Jacynthe told reporters at the Economic Observer Online at Montreal's corporate headquarters in Montreal on October 11 that Rio Tinto and Alcan are very supportive of pricing mechanisms that can fully reflect market values ​​and trends. In the long run, the pricing of alumina should be able to better reflect the dynamic changes in the market, but it is still not easy to say whether or not it can use index pricing.
Jacynthe explained that the above support is based on two reasons. One is the 2 million tons of bauxite project currently being expanded by Rio Tinto and Alcan. This price mechanism will benefit the project's profitability prospects because This project has a very good cost advantage; secondly, if prices can reflect the highest cost price in the market in time, then Rio Tinto Alcan will have more advantages in the market.
In the past 30 years, the global alumina market has been using long-term agreements for benchmark prices, but since last year, the world's mining giants including BHP Billiton have begun to appeal to the market and should abandon this long-term agreement mechanism and move to more flexible pricing. system. In November last year, Alcoa announced that it would adopt a new pricing mechanism to determine some long-term supply contracts. The new mechanism uses a basket of indices to bind with spot prices. This change is similar to the iron ore pricing mechanism.
Alumina is the basic raw material for the production of downstream electrolytic aluminum and aluminum products. In the past 10 years, China’s electrolytic aluminum production has grown to 19 million tons, making it the world’s largest aluminum producer and consumer. However, as a result, China needs to import large quantities of alumina or bauxite each year.
Jacynthe said that China's massive import of bauxite is a good thing for Rio Tinto. In order to respond to China’s tough demands, Rio Tinto is also expanding our bauxite production capacity.
Jacynthe stated that Rio Tinto and Alcan want to minimize their own production costs, so they also want to see price mechanisms that reflect market value. If it can fully reflect the price mechanism of alumina, it will raise prices, and Rio Tinto will also make money because Rio Tinto's costs are lower.
Jacynthe is not worried about the large-scale expansion of alumina production in China in recent years. In Jacynthe's view, the characteristics of alumina determine that this product cannot be stored, so the price of this industry can adjust itself. "Any pricing mechanism should reflect the true supply and demand of the market. Price changes should reflect the production cost of alumina. For Alcan, this should be a very good thing."
Jacynthe explained that the recent increase in alumina production capacity in China stems from the increase in imports of bauxite from China. “At present, we do not see that China will become one of the largest alumina exporters. Exporting alumina means exporting energy, so the government may limit alumina exports.â€
Jacynthe explained that the above support is based on two reasons. One is the 2 million tons of bauxite project currently being expanded by Rio Tinto and Alcan. This price mechanism will benefit the project's profitability prospects because This project has a very good cost advantage; secondly, if prices can reflect the highest cost price in the market in time, then Rio Tinto Alcan will have more advantages in the market.
In the past 30 years, the global alumina market has been using long-term agreements for benchmark prices, but since last year, the world's mining giants including BHP Billiton have begun to appeal to the market and should abandon this long-term agreement mechanism and move to more flexible pricing. system. In November last year, Alcoa announced that it would adopt a new pricing mechanism to determine some long-term supply contracts. The new mechanism uses a basket of indices to bind with spot prices. This change is similar to the iron ore pricing mechanism.
Alumina is the basic raw material for the production of downstream electrolytic aluminum and aluminum products. In the past 10 years, China’s electrolytic aluminum production has grown to 19 million tons, making it the world’s largest aluminum producer and consumer. However, as a result, China needs to import large quantities of alumina or bauxite each year.
Jacynthe said that China's massive import of bauxite is a good thing for Rio Tinto. In order to respond to China’s tough demands, Rio Tinto is also expanding our bauxite production capacity.
Jacynthe stated that Rio Tinto and Alcan want to minimize their own production costs, so they also want to see price mechanisms that reflect market value. If it can fully reflect the price mechanism of alumina, it will raise prices, and Rio Tinto will also make money because Rio Tinto's costs are lower.
Jacynthe is not worried about the large-scale expansion of alumina production in China in recent years. In Jacynthe's view, the characteristics of alumina determine that this product cannot be stored, so the price of this industry can adjust itself. "Any pricing mechanism should reflect the true supply and demand of the market. Price changes should reflect the production cost of alumina. For Alcan, this should be a very good thing."
Jacynthe explained that the recent increase in alumina production capacity in China stems from the increase in imports of bauxite from China. “At present, we do not see that China will become one of the largest alumina exporters. Exporting alumina means exporting energy, so the government may limit alumina exports.â€
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