absolutely flying, page-45

Bauxite is around the $75 / tonne.That was back in feb. alumina prices at around us$580 and aluminium at around US$2860 .Just some news found browsing .

London (Platts)--12May2008
An emerging power crunch and a shortage of high quality bauxite willcause a shift in the competitive landscape in the aluminium industry,driving aluminium and alumina prices higher, Citigroup said in a commodityoutlook report Monday.
The bank said aluminium prices were expected to average $2/lb in 2009,and rise further in 2010. "We have also increased our long term price toUS$1.30 in real terms, and the aluminium:alumina long term contract rate to13.5%," it said.
Citigroup noted that electricity capacity reserve margins were falling inmany countries with large smelting industries putting security of supply at risk. It said the most vulnerable were smelters in China, South Africa,
Brazil, and the USA. "Electricity prices are increasing at 10%/year on a
production weighted basis. In China, the electricity supply balance is
expected to tighten further and tariff discounts to smelters are being
removed," it said.

"Rising electricity prices and security of supply will present huge
industry challenges," the bank said, adding that as much as 80% of global
capacity was located in countries where the reserve margin was already below
comfort levels or was heading that way.

It said in China the electricity market was expected to tighten further,
but the government was resisting increasing general tariffs because of the
inflationary consequences. "Tariff discounts to smelters are being removed,
and smelters are likely to be squeezed," it said.

Citigroup noted that appreciating currencies were also pushing costs
higher. "This is particularly significant in two major producing countries
Australia and China. The cost of carbon emissions will be an increasingly
important source of electricity cost inflation," it said.

Citigroup said smelting capacity was migrating to regions where there was
stranded power and 40% of new capacity would be built in the Middle-East,
Iceland, Russia, Indonesia and Africa. "Even in these regions however,
improving distribution networks mean stranded power is becoming rarer. Planned
capacity increases in China and India may not eventuate," the bank said.

It noted that the upward pressure on power costs is also pushing alumina
production costs higher. "But potentially even more important is likely to be
reduced availability of high quality bauxite. Most vulnerable are those
Chinese refineries dependent on imported tri-hydrate bauxite," it said, adding
that the "aluminium:alumina" price linkage rate was increasing and the bank
had moved its assumed long term rate from 12.5% to 13.5%.

Citigroup said there would be "clear winners and losers among aluminium
companies as these scenarios unfold. Winners will be those companies with
captive, low cost hydro power and backward integrated into high quality
bauxite."

ALUMINIUM MARKET SEEN IN DEFICIT FOR 2008, DEEPER DEFICIT IN 2009, 2010

"We expect the aluminium market to be in deficit in 2008, moving into
deeper deficits in 2009 and 2010. Supply surpluses loom further out, but
inventories will remain low relative to history," Citigroup said, adding that
the main drivers of the deficit were supply curtailments induced by high power
costs and shortages, and continued robust demand growth (8%/year).
It said this outlook would support prices above $2/lb for the next five
years. "However, in the short term some weakness is expected following a
reversal of recent dramatic inflow of investment funds," it said.

The bank noted that a bauxite shortage was looming. "Bauxite supply
growth is expected to slow. The third party traded market is increasing in
importance, and access to high quality bauxite will be a key source of
competitive advantage. The alumina market has seen some relief from spot
rising prices recently, but over supply is expected until 2010," the bank
said, adding that in subsequent years however a tight market loomed


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