The sale of stakes in Brazilian refineries could lead to a redistribution of the aluminum market and a change in demand for the metal.
Norwegian aluminum producer Norsk Hydro announced the sell of a 30% stake in Brazilian alumina refinery Alunorte and a 5% stake in bauxite producer Mineracao Rio do Norte to Swiss giant Glencore.
The deal of approximately $700 million will be completed in the second half of 2023. After signing the agreement, Glencore will have the right to a certain share of metal produced by Alunorte and Mineracao Rio do Norte, which will be proportional to the value of the acquired stock. This will allow Glencore to control most of aluminum production and have greater access to raw materials.
The price of the deal is based on a total net enterprise value of $1.11 billion, which will be adjusted for net debt of about $335 million.
Increasing demand for the metals needed for green energy transition is triggering a wave of mergers and acquisitions in the mining industry.
The Alunorte refinery, the largest of its kind outside of China, processes bauxite and alumina to produce aluminum, while making 6.3 million aluminum oxide blends per year.
After the transactions, Norsk Hydro will own 62% of the Alunorte plant, Glencore will own 30%, and the remaining 8% will be distributed among small shareholders.
Since Glencore will control a significant share of production, its decisions will affect aluminum pricing.
Increasing demand for green energy metals could lead to higher aluminum prices in the long term.
The aluminum price is near the support level of the corrective uptrend on the H4 timeframe. The Relative Strength Index (standard values) left the oversold zone, signaling the price movement towards the resistance line.
The price is forming the second descending wave on the H1 timeframe, where the decreasing momentum may fade, facing the support of the ascending channel on the H4 timeframe. Thus, there are signs of the beginning of the third ascending wave’s formation.
Signal:
The short-term outlook for aluminum suggests buying.
The target is at the level of 2,435.
Part of the profit should be taken near the level of 2,370.
The Stop-loss is at the level of 2,250.
Bullish trend is of short-term nature, so it is worth selecting the trading volume of not more than 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
