Financial Associated Press (Shanghai, editor Zhou Ling) - as aluminum prices soared to a 13 year high, Alcoa, the largest aluminum producer in the United States, and south32 Ltd., Australia's third-largest mining company, are starting to restart alumar, an idle aluminum plant in Brazil.

Alumar aluminum plant in Northeast Brazil is jointly owned by Alcoa and south32, accounting for 60% and 40% of the shares respectively. It has three electrolytic series with a capacity of 447000 tons / year. The aluminum plant has comprehensively reduced its production capacity since 2015.

Alcoa said that the restart work will start immediately. It is expected to resume production in the second quarter of 2022 and run at full capacity in the fourth quarter of 2024. At that time, the aluminum plant will also realize 100% renewable energy power supply. Alcoa is expected to share about $75 million in restart costs.

Alumar's restart proposal was mentioned as early as may this year. As an important industrial metal, aluminum is widely used in products such as cars and beer cans. In the past 18 months, with the demand growth brought by economic restart, the price of aluminum has almost doubled to a 13-year high.

China is the world's largest aluminum producer. In line with the government's policy guidelines to curb the blind development of high energy consumption and high emission projects, relevant aluminum enterprises are reducing production capacity. In early September, Yunnan Provincial Development and Reform Commission issued the notice of the energy conservation leading group on resolutely doing a good job in the work related to dual control of energy consumption, which clearly required that the local aluminum output from September to December 2021 should not exceed the output in August.

"The aluminum market is still tight. There is a shortage of global aluminum supply due to China's production reduction, port delays and shipping problems." Colin Hamilton, a commodity analyst at BMO capital market, said in the report. "We expect that the resulting continuous price rise will stimulate the increase of production capacity. The first example is Alcoa's announcement of restart yesterday."

However, the current surge in energy costs is making it more difficult to restart high-cost smelters around the world. By 2024, alumar plans to use 100% renewable energy, but the long-term drought in Brazil limits the amount of hydropower.

Although the current aluminum price has soared and aluminum producers can make huge profits by using idle production capacity, their production process also needs to consume huge energy. An aluminum factory consumes as much electricity as a big city.

John Slaven, Alcoa's chief operating officer, said, "our restart decision is based on an analysis that shows that (alumina) smelters are competitive in all cycles with fixed smelters, strong labor force and competitive renewable energy arrangements."

However, alumina accounts for only a small part of global aluminum production. Harbor intelligence researchers predict that the total global aluminum output will reach about 70 million tons in 2022, of which China's output will account for 57% of the world.

At present, Alcoa's primary aluminum production capacity is 3.18 million tons / year, distributed in Australia, Brazil, Canada and other countries. By the end of the second quarter of 2021, the company's annual production capacity in operation was 2.35 million tons. If the capacity of alumar plant is restored as scheduled, it means that Alcoa's capacity utilization rate exceeds 80%.