Alumina market trends in the 1990s

During the past decade, alumina prices have been highly volatile, so much so that it has endangered the existence of some producers, and limited the ability of some smelters to benefit from higher aluminium prices. Although certain trends can be identified for the 1990s, some factors could again result in large price fluctuations in the alumina market. After a review of those identified trends and factors, this paper attempts to focus on ways to limit the effect of fluctuations in the non-integrated alumina market.     

Export efficiency of large projects: The case of aluminium smelters

We draw attention to a number of key factors in the evaluation of major projects, such as smelters, which are highly capital- and energy-intensive as well as export-orientated. The practice of justifying such projects by upvaluing foreign exchange is considered, as is the cost of distortion. Export efficiency is introduced as the key criterion: the efficiency of some recent smelter proposals in Oceania was between 36 and 50 cents in the dollar. A correct power price is essential: hydropower (in contrast with hydroenergy) should be priced as a depletable resource.     

Changing patterns in aluminium production costs

The average cost of producing aluminium fell slightly in nominal terms between 1982 and 1992, and there has thus been a sharp fall in real terms. The average cost also shows a marked cyclical fluctuation during individual years, partly as a result of the feedback effect from final metal prices to the cost curve. Between 1985 and 1992, exchange rate fluctuations produced a sharp change in the relative position of US and European smelters. During the next eight years, costs are likely to rise gradually in real terms, reversing the historical trend, and unless the higher cost European smelters can cut costs significantly, they may face a bleak future.     

Pricing behaviour and market power in North American non-ferrous metal industries

The paper considers the degree to which declining market power explains modifications in pricing behaviour observed since the late 1970s in the North American aluminium, copper, lead and zinc industries. More precisely, it relates those changes in pricing policies to the price elasticity of demand facing the dominant strategic group in each industry, the cost elasticity of supply and to the management's ability to coordinate or internalize conduct decisions. The results suggest that the firms in the copper and lead industries do not hold as a group any form of market power. In the case of the aluminum industry, a notable increase in the price elasticity of demand since the end of the 1970s, a sustained decrease in the concentration ratio and a rigid production process are weakening the presence of market power in that industry. The results are inconclusive in the case of the zinc industry since the determinants of market power move in opposite directions.     

The IBA and cartel problems : Prices, policy objectives and elasticities

The bauxite-aluminium industry structure is reviewed to illustrate the character of the threat posed by the formation of the International Bauxite Association (IBA). Bauxite price is a transfer price internal to vertically integrated firms, but Caribbean governments' fiscal revenue needs provoked a consistent tendency towards price increases. Australia is not interested in this or in a bauxite cartel, but rather in developing smelting capacity, exploiting its energy resources, and the elimination of barriers to Australian aluminium imports. Some elasticity estimates previously presented for demand and supply, together with their estimation method and policy implications, are strongly criticized.     

POLICY IMPACTS ON AGRICULTURAL IRRIGATION ELECTRICITY DEMAND IN THE COLUMBIA BASIN1

ABSTRACT: Accurately estimating the price elasticity of demand for irrigation electricity is important to major electricity suppliers such as the Bonneville Power Administration (BPA) of the Pacific Northwest. The BPA has a revenue maximization objective, and the elasticity of demand is central to its rate setting process. Several studies have attempted to estimate demand for irrigation electricity, but none has explicitly included federal agricultural policy and program variables. Tins paper discusses how agricultural programs may influence farmers irrigation decisions and thus their demand for irrigation electricity. It suggests that existing programs serve to make farmers more responsive to electricity rate increases than would otherwise be the case. Thus, studies that fail to include them may underestimate the responsiveness of farmers to electricity rate increases.     

Electricity supplies for the primary aluminium industry

The historical relationship between aluminium smelting and hydroelectric development is examined. Data on hydroelectric schemes presently planned or under construction are used to project the quantities of aluminium which could be produced using hydroelectric power by the year 2000. Projections of aluminium demand are made and these are compared with the projections of hydrobased aluminium supply. It is concluded that the majority of the world aluminium capacity which will be installed up to the end of this century will have to rely on non-hydroelectric power, based on coal or nuclear energy. The sensitivity of the projections to the assumptions is tested and the conclusions are found to be robust.     

Market transparency in the international aluminium industry

Transparency requires many buyers and sellers with transactions executed at arms length in an open environment. The paper highlights the influence on transparency of the ownership and production structure; price formation; and the nature of the product. The world aluminium industry is analysed in light of the above in view of the emergence of terminal markets for aluminium. The disjuncture between the interests of physical traders and those speculating futures contracts is analysed in terms of the latter's effect on investment. Finally, the benefits and difficulties associated with terminal markets are explored, trends in the aluminium industry reviewed, and a framework within which to cope with aluminium as a commodity is proposed.     

An economic model of the US aluminium market

An economic model of the US aluminium industry is constructed and estimated with annual data over the period 1960–1978. The authors' analysis shows that both the short- and long-term price elasticities of demand are relatively low, and that demand is highly dependent on aluminium end-use activity. A forecasting exercise is also undertaken, and the errors of forecast calculated.     

Copper smelting and refining

Detailed research by the Commodities Research Unit (CRU) reveals a wide variation in direct operating costs at copper smelters and refineries. The cost curve for smelters is almost a straight line, indicating that so far there has been no levelling of costs as there has been in the mining industry. Operating costs at smelters using reverberatory furnaces are well below costs at plants using modern technology, but this apparent paradox is shown to be a reflection of location. CRU argues that costs are an important determinant of smelter/refinery competitiveness, but that other factors such as location and tariffs are also significant. Operating margins world-wide show enormous variations, but companies' increasing interest in their processing operations, coupled with changes in tariffs, are predicted to lead to a much more competitive market.     

Theory of storage,inventory and volatility in the LME base metals

The theory of storage, as related to commodities, makes two predictions involving the quantity of the commodity held in inventory. When inventory is low (i.e. a situation of scarcity), spot prices will exceed futures prices, and spot price volatility will exceed futures price volatility. Conversely, during periods of no scarcity, both spot prices and spot price volatility will remain relatively subdued. We test these predictions for the six base metals traded on the London Metal Exchange (aluminium, copper, lead, nickel, tin and zinc), and find strong validation for the theory. Including Chinese inventories reported by the Shanghai Futures Exchange strengthens the relationship further. We also introduce the concepts of excess volatility, inventory-implied spot price and inventory-implied spot volatility and illustrate some applications.     

Factor demand flexibility in the primary aluminium industry: Evidence from stagnating and expanding regions

The purpose of the paper is to analyse and compare short-run factor demand responses to price changes in the primary aluminium industry in Western Europe and the Africa-Middle East (AME) region. We outline a Translog variable cost function model, which is estimated employing a panel data set at the individual smelter level over the time period 1990-2003. The empirical results show evidence of limited - but far from insignificant - price-induced factor demand responses in the short-run. Overall aluminium smelters in the AME-region show evidence of higher estimated short-run own- and cross-price elasticities than their competitors in Western Europe, at least when it comes to labour and electricity demand. One important reason for this result is the greater number of pot lines with slightly different technologies at each smelter as well as the more intense use of the Prebake technology in the AME-region making retrofits in existing plants less costly than in Western Europe. The results also suggest that in both regions the demand for electricity has over time become less sensitive to short-run price changes, while the labour and material demand responses to price changes have increased but only in the AME-region. The liberalisation of the Western European electricity markets in combination with the rigid labour markets in this part of the world suggest that the shift in production capacity from the western world to the AME-region as well as China may continue.     

Assessing vulnerability of selected sectors under environmental tax reform: the issue of pricing power

Environmental tax reform could bear heavily on manufacturing sectors that are energy intensive and highly traded, in particular if their options for adapting technology are limited. However, to the extent that such sectors can pass on the cost of the environmental taxes through higher prices charged to their customers, they will not suffer a lasting drop in profitability or output. To assess pricing power in key sectors, a model of long-run price setting behaviour is specified and tested. Significant and plausible results emerged from this exercise. Of the six sectors analysed, the Basic metals sector revealed least pricing power and, hence, greatest vulnerability, and the Non-metallic minerals sector revealed most pricing power. The results indicated that the world price, proxied by the US price, was less of a constraint than the EU price, proxied by the German price. Thus, international competitiveness fears are reduced not just where there is good potential for adapting technology but also if application of environmental tax reform is EU-wide.     

Long-run Price Prospects for Aluminium and Copper

The meaning and significance of alternative price quotations in the aluminium and copper markets are scrutinized. The history of aluminium and copper prices from the beginning of this century is surveyed. The causes to the fast fall in real aluminium prices until 1950, and to the exceptionally high copper prices between 1964 and 1974 are explained. A methodology for long-run price forecasting in metals markets is developed. This methodology, combined with appropriate empirical data and reasonable assumptions about such key factors as taxation, depletion, and energy costs, is used to forecast the prices of aluminium and copper until the end of this century. L'article étudie le sens et les conséquences des différents cours des marchés de l'aluminium et du cuivre. II fait l'historique des prix de l'aluminium et du cuivre depuis le début de ce siècle. II explique les causes de l'effondrement des cours de l'aluminium en prix constants jusqu'en 1950 et les cours exceptionnellement élevés du cuivre entre 1964 et 1974. L'article présente une méthodologie pour la prévision à long terme de l'évolution des marchés des métaux. Cette méthodologie, combinée avec des données empiriques adéquates et des estimations raisonnables portant sur des facteurs clefs tels que la taxation, la provision pour reconstitution de réserves et les coûts de l'énergie, est utilisée pour prévoir les prix de l'aluminium et du cuivre jusqu'à la fin du siècle. El significado e importancia de la fluctuación de precios en el mercado de cobre y aluminio se analiza en este artículo. Se revisa la variación histórica de los precios de cobre y aluminio desde el comienzo del siglo. Se explican las causas de la caída ràpida en términos reales de los precios de aluminio hasta 1950 y los precios de cobre excepcionalmente altos entre 1964 y 1974. Se desarrolla luego una metodología para el pronóstico a largo plazo de la demanda de metales. Esta metodología. conjuntamente con datos empíricos apropiados, asunciones razonables acerca de factores claves tales como impuesto, agotamiento de la mina y precios de energía, se emplea para pronosticar los precios de cobre y aiuminio hasta el final del siglo.     

Raw material problems of the Soviet aluminium industry

The Soviet Union possesses a huge hydro-electric power potential in southern Siberia, providing attractive sites for aluminium reduction capacity, but is poorly supplied with high-grade domestic bauxite resources. An early enthusiasm for the use of non-bauxitic domestic materials, notably nepheline and alunite, has waned in recent years, and Soviet aluminium planners have shown an increasing preference for imports of bauxite and alumina. By 1975 as much as 40% of Soviet aluminium production was derived from imported raw materials, indicating an unusual willingness to become dependent on foreign ore sources for this strategic metal. Future intentions are demonstrated by the abandonment of earlier plans for an expansion of non-bauxite based production, the construction of a large alumina plant on the Black Sea coast and proposals for a second seaboard plant on the Pacific coast, both using imported bauxite.     

Measurement of market power for the environmentally regulated Korean iron and steel manufacturing industry

For industries in which where market prices of certain inputs are not available, measuring the degree of market power by using the markup over the marginal market cost may be inappropriate. With regard to the Korean iron and steel manufacturing industry, which is subject to environmental regulations, the calculation of the price of abatement capital is hindered by a lack of relevant data. To increase the reliability of market power markups, this paper estimates the restricted cost function in which abatement capital is assumed to be quasi-fixed at an optimal level and the supply relation. The degree of market power for the industry, measured as the ratio of the estimated market power markup to the supply price, was estimated to be 0.54 on average between 1982 and 2001. The results indicate that ignoring environmental regulations can overstate the degree of market power by approximately 12%.     

Long memory and chaotic models of prices on the London Metal Exchange

Many financial time series exhibit irregular behaviour. Economic theory suggests that this irregular behaviour might be due to the existence of nonlinear dependence in the markets. Thus, economic time series are governed by nonlinear dynamics.The purpose of this paper is to investigate price behaviour in the London Metal Exchange market. Thus, this study will test the two most attractive nonlinear models—long memory and chaos—on six metal commodities to ascertain which model is consistent with the observed metal price nonlinear dynamics.Application of long memory and chaos analysis provides new approaches for assessing the behaviour of metal prices. We identified, in tin, a case of chaos. Our empirical results in the case of aluminium support the long memory hypothesis. A short memory model explains the underlying processes of the nickel and lead returns series, while zinc returns reflect an anti-persistent process. To our knowledge, this is one of the first attempts to apply long memory and chaos analysis in the evaluation of the behaviour of metal prices.     

碳市场和电力市场耦合研究

低碳化、清洁化是我国电力行业未来发展的方向。碳市场启动,电力作为试点行业,碳市场和电力市场面临着协调和融合问题。为研究碳市场和电力市场的耦合关系,本文首先分析了碳市场机制的成本节约效应以及与电力市场改革的互动效应;然后给出考虑碳排放价格的电力市场发电电能成本模型——LCOEe;最后以广东省为例,对广东碳市场碳价传导至电价设定情景并进行模拟分析。结果显示,碳市场和电力市场存在相互制约的关系,碳排放外部成本内部化影响电力市场出清电价,而电力市场能够缓解碳市场的减排压力,抑制碳市场的活跃度。两市场的耦合研究对于优化电源结构、促进新能源市场的发展,以及启发政策制定者重视两大市场的协同发展具有非常重要的现实意义。     

浅谈地价评估和管理中的几个问题

土地价格是土地价值和权益的具体表现，是调节土地利用的重要手段。地价管理在推进土地有偿使用、优化配置土地资源、促进土地市场建设等方面发挥着重要作用。而现行地价体系比较成熟的只有作为国有土地使用权出让标准的一种基准地价，为适应其它土地权利流转的需要，应建立以土地权利为核心的新型地价体系。     

The significance of futures trading in minerals and oil

Futures trading has been introduced for aluminium and oil in recent years and the range of contracts available on various minerals and oil products continues to widen. Concern has been expressed by producers of a number of minerals, including nickel and platinum, that the introduction of futures trading may introduce a speculative element to price determination that will create inappropriate or excessively volatile prices. It is the purpose of this article to analyse the role of futures trading in relation to trade in underlying commodities in general and especially for trade in minerals and oil. Evidence from oil and platinum markets, in particular, is adduced and examined in the light of earlier evidence of the influence of futures trading on underlying commodities. The contribution of futures trading is examined in detail and conclusions are reached on the significance of futures trading for minerals and oil.