UPDATE 1-Australia's Alumina Sees Balanced Alumina Market

MELBOURNE, Aug. 10 -- Australia's Alumina Ltd (AWC.AX: Quote) sees supply and demand for alumina in balance for the rest of 2010, it said on Tuesday, after reporting a return to the black in the first half as alumina prices and demand recovered.

Alumina's shares rose 1.8 percent in a weaker market as its dividend beat forecasts and it flagged that its Brazilian alumina refinery was on track to reach full capacity by the end of this year after suffering problems in the first half.

It said alumina demand in 2010 was expected to grow by 12 percent, a slightly higher forecast than earlier in the year.

"There is, however, a likelihood of some volatility in pricing as China manages its supply and demand position," the company said in its market outlook.

It also reassured investors on cost controls, saying the average cash cost of alumina production fell $4 per tonne from the second half of 2009, excluding its Brazilian operation.

Alumina, a 40 percent partner in the Alcoa World Alumina and Chemicals joint venture with Alcoa Inc (AA.N: Quote), reported underlying earnings after tax of $22 million for the six months to June 30, up from an underlying loss of $10 million a year ago.

The result was well below an average forecast of $39 million from four major brokers, but its dividend beat the average dividend forecast of 1.5 cents.

For the full year, analysts are expecting underlying earnings after tax of A$134.6 million ($123.4 million), according to Thomson Reuters I/B/E/S, rebounding from last year's underlying loss of A$2.2 million.

Alumina expects to produce between 15.3 million and 15.6 million tonnes of alumina in calendar 2010, down from an earlier forecast of 15.8 million tonnes.

It said the market was moving away from tying alumina prices to aluminium, with a spot market index likely to be announced, which would better reflect bauxite and alumina costs and speed up a move toward spot pricing of alumina. [ID:nSGE64608D]

Alumina's shares last traded up 1.8 percent at A$1.67, while the broader market was down 0.3 percent. ($1=1.091 Australian Dollar)