DUBAI (Reuters) - The outlook for aluminum prices in 2020 is “obviously more negative” than it was going into the year, pressured by the outbreak of coronavirus and a surge in supply from China, the chief executive of Saudi Arabian Mining Co (1211.SE) said.
“The coronavirus impact, the extension of Lunar year holiday does mean aluminum demand will be impacted by China,” Darren Davis, chief executive of the miner known as Ma’aden, told Reuters in an interview late on Wednesday.
The gulf’s largest miner posted a net loss of 1.528 billion riyals ($407.31 million) in 2019 compared to a net profit of 2.25 billion riyals in 2018, mainly due to sharp declines in commodity prices and the impact of accounting for new operations that were included in the earnings for the first time.
Prices for its main products fell last year.
Phosphate prices fell 18% in 2019 and aluminum prices declined 15%, the company said in its earnings presentation.
“We were already expecting a surplus of supply from China during 2020. So we are already pretty cautious about 2020,” Davis said.
Ma’aden, the world’s third largest producer of phosphate, is 65% owned by the kingdom’s sovereign wealth fund (PIF).
Davis said it was too early to predict a loss for 2020 as the company plans to boost production at its second phosphate plant in the industrial city of Wa’ad al-Shamal to 95% in 2020 from 75%-80% in 2019 to boost earnings.
“Will it be enough to offset any further decline in prices would depend on where the prices will go,” he said.
Davis said its underlying business is still strong with a 30% EBITDA margin, despite low aluminum and phosphate prices, and is generating strong cash flow.
He said the company expects its new gold mine to come on-stream in late 2021 or early 2022, and will produce 250,000 to 300,000 ounces a year.
Reporting by Saeed Azhar; editing by Jason Neely