Shares in Australia's Alumina Ltd have risen strongly after its joint-venture partner, Alcoa, signalled that the aluminium industry had turned around, with a jump in profit.
US aluminium company Alcoa reported a 59 per cent rise in first-quarter earnings, and the positive vibe helped lift Alumina's ASX-listed shares by 5.5¢ to $1.055.
Alumina chief executive John Bevan said Alcoa's strong result reflected improved industry conditions, despite volatility in aluminium prices and a strong Australian dollar.
Melbourne-based Alumina's only earning asset is its 40 per cent stake in Alcoa World Alumina and Chemicals, with Alcoa holding the remaining 60 per cent.
AWAC operates aluminium smelters at Portland and the struggling Point Henry plant at Geelong, which has had to be propped up by huge government handouts.
AWAC is benefiting from higher spot alumina prices (a key input in aluminium) that are not linked to the aluminium price, as has traditionally occurred.
Despite metals prices booming in recent years, China's overproduction of aluminium has driven down prices that were above $US3000 a tonne before the global financial crisis, to a realised $US2398 for Alcoa in the first quarter.
That reduction drove down input costs through the linked alumina price, which was below $US300 a tonne.
Mr Bevan said more than half of AWAC's alumina shipments would be priced on an independent spot basis this year, which were higher than alumina contracts linked to the aluminium price.
"However, aluminium and alumina prices have fallen recently and we remain cautious on the outlook for the remainder of the year," he said.
Alcoa reported a $US149 million ($144 million) first-quarter profit, up from $US94 million in the same period last year.
The first-quarter figure was down from $US242 million in the previous quarter, which had been inflated by asset sales.
Alcoa, the first major US company to report first-quarter earnings, pointed to strong efficiency gains and a slightly tighter supply market for its result. Alcoa said the alumina and aluminium markets were "essentially balanced" but would become slightly tighter as supply contracted.
AWAC's production of alumina for the first quarter was 3.8 million tonnes. Alumina received a fully franked dividend of $US25 million from AWAC for the quarter.