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Nalco Shares Fall Most In Five Months On Fears Of Lower Alumina Prices

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Shares of the state-run National Aluminum Corporation Ltd. fell the most in five months on fears that a possible resumption of full output at the world’s largest alumina refinery will lower prices.

Norwegian aluminum maker Norsk Hydro yesterday said it had signed two deals with Brazilian authorities which could pave the way for full output at the company’s Alunorte alumina refinery, according to Bloomberg. The unit has been operating at half the total capacity since March due to several embargoes by the local authorities to curb pollution. Norsk Hydro owns 92 percent of Alunorte.

Alumina prices are trading at their highest since March 2018, reclaiming the $640 a tonne-mark. The commodity is up almost 42 percent from the lows of July when it was trading at $450.

The Nalco stock fell 6.2 percent, the most since April 24 this year with trading volume about triple the 20-day average, after the reports about efforts to resolve output in Brazil. Kamlesh Bagmar of Prabhudas Lilladher, in a note to clients, advised trimming exposure to the company. While timelines to restart full operation at Alunorte are still not known, he said the agreement shows the government’s intent.

Nalco’s tried to allay fears. “Timeline for execution of the two orders by Norsk’s Hydro could take at least two months. Further, it remains unclear if the production of these orders would be implemented in stages or as whole,” said TK Chand, chairman and managing director, Nalco. Besides, according to him, workers strike at Alcoa, which has three refineries and 9 million tonne of production capacity would keep alumina prices bullish.

Alcoa's alumina production has been hit by a four-week strike at its Western Australian operations, raising the prospect of a widening supply deficit in the key aluminium-making ingredient, according to a report by finance.nine.com.

Chand expects alumina prices to trade around $625-675 a tonne in the next one to two months. They could fall to $525-575 a tonne once the normalcy resumes both in Norsk Hydro and Alcoa’s operations, he said.

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