Short-term theoretical alumina profits remain high, but with prices pulling back, profit margins are expected to narrow.

SMM June 15 News:

In May, due to relatively concentrated maintenance and production cuts at alumina enterprises, alumina supply tightened, and prices showed an upward trend. The theoretical profitability of alumina expanded. As of the end of May, according to SMM's daily cost-profit model, the theoretical profitability of alumina expanded to 409 yuan/mt.

Entering June, bauxite prices fluctuated, and the overall cost of alumina did not see significant changes. However, due to some recovery in profitability, some of the alumina capacity that had undergone maintenance and production cuts earlier resumed operations. Coupled with the ramp-up of newly commissioned capacity, the operating capacity of alumina rebounded. As of Thursday this week, the weekly operating capacity of alumina rose to 89.01 million mt/year, and alumina supply increased. Under these circumstances, the spot alumina prices came under pressure and pulled back. As of Friday this week, the SMM Alumina Index stood at 3,250.93 yuan/mt, a pullback of 24.6 yuan/mt from the end of May.

As of now, the theoretical profitability of alumina still stands at 375 yuan/mt. The operating capacity of alumina is expected to remain at a high level in the short term, and the alumina market is expected to show a slight surplus in June. As the spot supply of alumina rebounds and spot prices decline, the theoretical profitability of alumina is expected to narrow subsequently. Some high-cost enterprises are expected to face increased cost pressure, and there is a possibility that high-cost capacity may once again undergo maintenance and production cuts. Going forward, it is necessary to continuously monitor the production dynamics of alumina enterprises as well as the cost and profitability of alumina.