Domestic Alumina Operating Rate Remains High; Alumina Prices Expected to Stay Stable with a Slight Decline in the Short Term [SMM Alumina Morning Comment]

SMM Alumina Morning Comment 12.27

Futures Market: During the night session, the most-traded alumina 2502 futures contract opened at 4,749 yuan/mt, with a high of 4,773 yuan/mt and a low of 4,716 yuan/mt, finally closing at 4,751 yuan/mt, up 47 yuan/mt or 1.01%, with an open interest of 145,000 lots.

Industry Dynamics:

1. According to SMM data, as of this Thursday, the national weekly operating rate of alumina increased by 0.59 percentage points WoW to 85.94%. Among them, the weekly operating rate of alumina in Shandong remained flat WoW at 92.16%; in Shanxi, it decreased by 0.8 percentage points WoW to 77.23%; in Henan, it increased by 2.5 percentage points WoW to 69.17%; and in Guangxi, it remained flat WoW at 92.98%.
2. On December 24, Inner Mongolia Electric Power Investment Energy Co., Ltd. (hereinafter referred to as "Electric Power Investment Energy") announced that the second meeting of the company's eighth board of directors approved the "Proposal on Investing in the Construction of the Seventh Phase of the Tongliao Circular Economy Demonstration Project with a 450,000 kW Wind Power Project." The project is planned to have a construction scale of 450,000 kW wind power, with 63 wind turbines of 7.15 MW each to be installed. The power will be collected through 17 circuits of 35 kV collection lines to a newly built 220 kV booster station within the wind farm. The booster station will include two 240 MVA main transformers and four sets of dynamic reactive power compensation devices, with two 220 kV outgoing lines connected to the Honglü and Zhalü substations. The project is designed as a smart wind farm, with an integrated joint operation and control platform.

Spot-Futures Price Spread Daily Report: According to SMM data, on December 26, the SMM alumina index showed a premium of 1,035 yuan/mt against the most-traded contract's latest transaction price at 11:30.

Warehouse Warrant Daily Report: On December 26, the total registered warehouse warrants for alumina decreased by 6,932 mt from the previous trading day to 15,900 mt. In Shandong, the total registered warehouse warrants remained flat at 0 mt; in Henan, they also remained flat at 0 mt; in Guangxi, they decreased by 299 mt to 301 mt; in Gansu, they remained flat at 0 mt; and in Xinjiang, they decreased by 6,633 mt to 15,600 mt.

Overseas Market: As of December 26, the FOB Western Australia alumina price was $670/mt, with an ocean freight rate of $22.45/mt. The USD/CNY exchange rate sell price was around 7.32. This price translates to an approximate selling price of 5,806 yuan/mt at major domestic ports, 81 yuan/mt higher than domestic alumina prices, keeping the alumina import window closed.

Summary: Supply side, domestic alumina operating rates remained high. Although some enterprises reduced roasting capacity due to winter environmental protection measures and maintenance, the significant profitability of alumina stimulated high enthusiasm for production increases among alumina refineries. Additionally, some alumina refineries slightly increased their operating capacity. Demand side, downstream aluminum smelters faced severe losses, with some aluminum plants in south China undergoing minor maintenance and production cuts. Other aluminum plants had planned to complete technological transformations for resumption of production, but progress stalled due to high raw material costs, leading to a slight decrease in demand. Overall, the tight supply situation for alumina has improved compared to before. However, buyers and sellers are still in a phase of negotiation, with suppliers maintaining a sentiment to stand firm on quotes. Downstream players mainly execute long-term contracts and restock on dips, showing low acceptance of high prices. In the short term, prices are expected to remain stable with a slight downward trend.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make cautious decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]