Aluminium Bahrain (Alba) plunged to its lowest level on record yesterday after it said the price it paid for natural gas would increase by 33 per cent.
The price rise, ordered by Bahrain's state-run energy supplier, will add US$85 million to the company's costs, it said in a filing.
Alba's shares dropped 8.1 per cent to 0.8 dinars, the lowest level since November 30 last year, the day of listing on the Bahrain Bourse. Alba is down 9 per cent since the time of listing.
The company currently pays US$1.50 per million British thermal units (mmbtu) for gas it uses to produce more than 870,000 tonnes a year of high-grade aluminium, a fraction of the cost paid by competitors in other parts of the world. As of January next year, Alba will have to pay $2.25 per mmbtu.
Analysts say such subsidies in the Middle East are unsustainable because product prices are often lower than the cost of production.
JPMorgan yesterday cut its Alba rating to "underweight" from "overweight" with a price estimate of 0.38 dinar.
The price of aluminium was down almost 2 per cent yesterday to $2,296 a tonne on the London Metal Exchange after the US Federal Reserve gave a grim outlook for the US economy with "serious downside risks". This month, Laurent Schmitt, Alba's chief executive, said he estimated aluminium to trade at about $2,500 per tonne.
The metal has fallen 12.5 per cent in the past six months.
Last month, Alba reported a 22 per cent drop in second-quarter profit on costs associated with job cuts.
Net income fell to $185m from $237m a year earlier. Earnings before interest, taxes, depreciation and amortisation increased to $175m from $147m.
Bahrain was rocked by protests that broke out in February, as civil uprisings in the Arab world ousted leaders in Egypt, Tunisia and Libya.