Alumina Shares Surge Following Kwinana Refinery Closure Announcement

Alcoa and its ASX-listed partner Alumina have decided to cease production at the 60-year-old Kwinana refinery in Western Australia by September. This strategic move is anticipated to potentially bring dividends back as early as next year.

Following this announcement, a number of analysts upgraded their earnings expectations, ratings, and target prices for Alumina. Alumina Limited, owning a 40% stake in Kwinana and other Alcoa assets in Australia, Brazil, and Spain through their joint venture Alcoa World Alumina and Chemicals (AWAC), saw its shares close 17.4% higher at $1.15 on Wednesday. This rise came after a 7.7% increase the previous day.

While the Kwinana refinery is set to close, Alcoa's other alumina refineries in Western Australia, Pinjarra and Wagerup, will continue operations. This strategic shift in focus could have significant implications for the company’s operational dynamics.

The closure of the Kwinana refinery will result in the loss of 750 Alcoa positions and an additional 250 contractor roles. This decision underscores the ongoing adjustments and realignments in the alumina industry.

Goldman Sachs equity analyst Paul Young commented on the recent market response, noting that Alumina had been oversold following a challenging year marked by declining margins, dividend cuts, and production challenges. The target price for Alumina was subsequently raised to $1.43.