Alumina’s sole business is a 40 per cent stake in the Alcoa World Alumina and Chemicals business that is centred on Australian alumina refineries.

Alcoa, generally the first major US company to report results, revealed yesterday that it had returned to profitability after three consecutive quarterly losses as its aluminium smelters performed well. But the result was not so strong for Alumina, its chief executive Peter Wasow said.

“Margins for the alumina segment declined over the second quarter, predominantly due to a higher Australian dollar and Braz¬ilian real, the timing of maintenance and higher oil costs,” Mr Wasow said.

“Industry conditions remained challenging due to long refining positions in the Atlantic region and China, as smelter curtailments in those areas reduced demand.”

Alcoa reported a second-quarter profit of $US138 million ($146.7m), up from a loss of $US178m the previous quarter. Its alumina division earnings dropped from $US92m to $US38m.

Unfortunately for Alumina, it also has exposure to Alcoa’s two high-cost Victorian aluminium smelters, one of which, Point Henry near Geelong, is scheduled to close next month.

Credit Suisse analyst Matthew Hope said Alumina’s share of the earnings was a $US9m loss, largely because of Point Henry closure charges and an implied $US12m loss from AWAC’s Australian smelters.

Alumina shares slipped 4.5c to $1.395, but are still up 25 per cent for the year.

Alcoa chief executive Klaus Kleinfeld remained positive on the outlook for aluminium and alumina, which bodes well for Rio Tinto, whose Alcan aluminium business was disastrously acquired in 2007 for $US40 billion and has weighed on profits since.

Mr Kleinfeld said supply and demand for both commodities was balanced but markets had tightened recently. Alcoa was boosting its forecast 2014 aluminium deficit from 730,000 tonnes to 930,000 tonnes and cutting an alumina surplus forecast from 2.2 million tonnes to 800,000 tonnes.

“The (forecast) alumina surplus tightened due to Indian production not coming on line as quickly as we expected and China imports increasing,” Mr Kleinfeld said. “The change in the aluminium projection is driven by a lower surplus in China, reflecting curtailments.”

Chinese overcapacity has hobbled the aluminium industry for the past six years, but industry-wide shutdowns of high-cost capa¬city around the globe, including Point Henry, are starting to counter that to some extent.