Alumina spot cargo supply tightens, prices fluctuate at highs [SMM Aluminum Futures Brief Comment]

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SMM, May 22:

Today, the most-traded SHFE aluminum 2507 contract opened at 20,155 yuan/mt, with a high of 20,265 yuan/mt, a low of 20,100 yuan/mt, and closed at 20,210 yuan/mt, up 0.2%. Trading volume was 120,000 lots, and open interest was 203,000 lots.

SMM Commentary: On the macro side, the US dollar index extended its decline from the previous two trading sessions overnight, weighed down by disputes over US tax cuts and spending bills, as well as weak demand for the 20-year US Treasury bond auction. Market concerns about rising US debt and a weakening economic outlook intensified, leading to increased risk aversion. On the fundamentals side, there were relatively small changes in the short-term supply side. On the cost side, the specific impact of the Guinea incident on local bauxite supply remains to be assessed, and it may provide short-term sentiment-based cost support for alumina. On the demand side, it faces dual pressures from domestic seasonal weakness and trade uncertainties, and the operating rate of short-term aluminum processing enterprises will be under pressure. Overall, the current low inventory provides support for aluminum prices, but macro headwinds and off-season pressure on the demand side limit upside room. In the short term, aluminum prices are expected to remain range-bound, with attention to domestic and overseas demand performance as well as bauxite supply conditions.

Today, the most-traded alumina 2509 contract opened at 3,230 yuan/mt, with a high of 3,272 yuan/mt, a low of 3,206 yuan/mt, and closed at 3,216 yuan/mt, up 1.01%. Trading volume was 1.48 million lots, and open interest was 373,000 lots.

SMM Commentary: Last week, maintenance and production cuts were concentrated among alumina enterprises in south China, with operating capacity decreasing by 2.9 million mt/year on a WoW basis, and spot cargo availability tightened again. In addition, alumina enterprises have been facing losses in recent months, with a strong intention to refuse to budge on prices. Coupled with maintenance and production cuts, spot cargo availability tightened, and spot transaction prices continued to rebound. Last Friday, due to the revocation of mining rights for some enterprises in Guinea, some currently operating enterprises received notices of production halts. Some miners declared force majeure to shipping companies this Monday. On Tuesday evening, in the order read by the Guinean authorities, the revoked mining rights were placed in strategic reserve areas. The specific impact of this incident on Guinea's bauxite supply remains to be assessed, and it may provide short-term sentiment-based support for bauxite prices, thereby providing cost support for alumina. Subsequent attention should be paid to changes in the operating capacity of alumina refineries, as well as the shipment volume of Guinea bauxite at the raw material end and the dynamics of related enterprises.

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