The Alumina Limited (ASX: AWC) share price shot up early on Monday, jumping 9.27% higher to $2.18 within the first few minutes of trade.
Those big gains have since retreated, but the Alumina share price is still trading higher, currently up 6.02% at $2.12.
Let's take a look.
What's driving the Alumina share price?
With no news released today, price increases and a supply shortage could be the forces behind a 25% rally in the Alumina share price in the last 7 trading sessions.
The company is engaged in a broad range of aluminium-related activities including bauxite mining, alumina refining and aluminium smelting.
Aluminium prices have hit their highest levels in more than a decade amidst potential shortages in China, according to a Reuters report.
The report said benchmark three-month aluminium climbed 2.7% to $2,722 a tonne, while the "most-traded" October aluminium contract on the Shanghai Futures Exchange closed 1.2% up at $3,311 a tonne, near its highest since August 2008.
To add some perspective, Alumina's 1H21 results last month highlighted average realised aluminium prices of US$2,303/t.
According to reports, aluminium shortages have been fulled by production cutbacks in China. The government is increasing oversight on highly polluting industries in an attempt to meet its climate and emission goals.
Last Monday, Bloomberg said that producers in China's southern Guangxi province would "cut output of energy-intensive materials in response to Beijing's campaign to save power and restrain emissions".
The Guangxi government has asked for production cuts in sectors including aluminum, alumina, steel, ferroalloys and cement. Some aluminum and alumina smelters will be required to cap output in September at half their capacity, while some new smelting projects will be delayed.
What's next for Alumina?
The Alumina share price is up 10.3% year-to-date thanks to its recent rally. The company is bullish on the outlook for the aluminium market.
In its half-year results, the company said:
Global aluminium demand is now back to pre-virus levels, largely due to economies recovering post-COVID, helped by Government stimulus packages.
This is expected to grow with further economic recovery and greater demand for aluminium in a decarbonising world, largely due to its lightweight properties and recyclability.
From an operational perspective, the company's "low-cost assets" were able to produce record bauxite and alumina outputs in the first half.
