Norwegian aluminum producer Norsk Hydro has cut output at its Alunorte plant in Brazil by 50% following disruptions to natural gas availability. According to Bloomberg, the supply disruption at Alunorte — one of the world's largest alumina refineries — forced the halving of production and sent aluminum prices in London to a seven-week high. Hydro stated that production would return to full capacity once gas supplies normalize.

Alumina is the critical intermediate feedstock for primary aluminum smelting, and Alunorte's output supplies smelters across the global trade. A prolonged cut at a facility of this scale tightens the alumina market, which in turn can constrain raw material availability for aluminum producers worldwide.

Aluminum rose nearly 2% in London, trading at $3,373 per metric ton. Alumina futures gained 1% in Shanghai.

Natural gas is critical to Alunorte because alumina refining requires high-temperature heat and steam. The gas powers the Bayer process, which refines bauxite through three key stages:

• Digestion: Bauxite is mixed with caustic soda and heated under pressure to dissolve aluminum-bearing minerals.
• Evaporation and steam generation: Large boilers provide steam throughout the refinery.
• Calcination: Aluminum hydroxide is heated to approximately 1,832°F to remove water and produce smelter-grade alumina.

The disruption means Alunorte cannot maintain sufficient steam and furnace heat to operate its production lines, forcing the refinery to reduce throughput. Alunorte is the world's largest single-site alumina refinery and the largest outside China. It is located in Barcarena, Pará, and has an annual capacity of 6.3 million metric tons.

Inventories in London Metal Exchange (LME) warehouses have fallen to 250,000 tons — the lowest level since November 1990. LME warehouse stocks serve as a key benchmark for globally available metal, and levels this low indicate that consumers are drawing on stored supply faster than it is being replenished. Norsk Hydro recently warned that the annual global aluminum deficit could exceed 900,000 tons if trade through the Strait of Hormuz remains disrupted.

The Strait of Hormuz is a vital transit route for energy commodities, and any disruption to shipping there affects natural gas and fuel availability in multiple regions, creating knock-on effects for energy-intensive industries such as aluminum smelting and alumina refining.

In the broader industrial metals space, copper futures in London are trading above $14,000 per ton as metal inflows into the United States continue ahead of President Trump's expected tariff, effectively tightening global supplies.

Surging prices for both industrial metals stand to make electrification and decarbonization more costly.

"Copper and aluminum are important beneficiaries of electrification and decarbonization," said UniCredit SpA strategist Thomas Strobel. "While copper's investment case is driven by structural supply constraints, aluminum benefits from lightweighting, grid expansion and recycling. Together, they offer complementary exposure to some of the strongest long-term trends in the global economy."

Source: OilPrice.com | By Zerohedge