Alunorte embarks on US$600mn second expansion

Brazilian alumina producer Alunorte is kicking off its second expansion phase this month, the company told a group of investors and analysts. The Barcarena-based refinery in northern Brazil's Para state is investing US$600mn to install two new production lines, its fourth and fifth, that will boost installed capacity from 2.38Mt/y to 4.18Mt/y when the project is completed in 2006. The fourth line is estimated to need 30 months to build and the fifth, 33 months. The two lines will be constructed simultaneously. The start of the second expansion comes after Alunorte finished its first project in April this year, to build a third production line with capacity of 825,000t/y. With the third line, the company forecasts revenues will reach US$440mn this year, up from the US$300mn in 2002. Production is expected to hit 2.34Mt in 2003, against last year's 1.6Mt. The decision to build the two new lines stems from a forecast rise in overseas demand for Alunorte's output. "The additional production of 1.8Mt/y of alumina will be for the international market because there is no new project for primary aluminum being installed here in Brazil and therefore no additional demand," Murilo Pinto de Oliveira Ferreira, Alunorte's president, was quoted as saying by Brasil Mineral magazine. But Alunorte is taking a "conservative view" that overseas demand for alumina will grow by just 2.5-3% a year, Katia Brollo, an analyst from Unibanco investment bank, told BNamericas. Other market researchers such as London-based CRU International put growth at 5% a year, she said. "China's demand for alumina is expected to expand 10% year with the construction of new primary aluminum smelters, and will prove to be a key element in the success of Alunorte's expansion," she said. Rio de Janeiro-based mining giant CVRD (NYSE: RIO), the world's largest iron ore producer, is the majority shareholder in Alunorte via its aluminum arm Aluvale. Other investors in the refinery are Norway's Norsk Hydro, Japan's NAAC, Brazilian aluminum company CBA and Japan Alunorte Investment Corporation.