Analysis and outlook of domestic alumina price trends in H1 2024

In H1 2024, alumina prices showed an upward trend. The prices were relatively stable in Q1, while in Q2, they surged significantly and then stabilized. The highest price in H1 2024 was 3,908 yuan/mt (mid-May 2024), and the lowest price was 3,154 yuan/mt (early 2024), with a price spread of 754 yuan/mt.

In Q1 2024, domestic alumina prices remained relatively stable. In January, prices increased due to tight domestic ore supply, energy supply issues, and the heavy pollution weather warnings affecting alumina producers in north China. Some alumina refineries in south-west China planned to halt production pre-holiday due to ore supply issues. Except for some alumina refineries in Shanxi where ore supply tightness eased and operating capacity increased, domestic spot alumina supply remained tight. With no significant changes in alumina demand, spot prices rose slightly. In February, the resumption progress of alumina producers in Shanxi and Henan was lower-than-expected, and alumina producers were reluctant to sell. Spot prices remained firm, with a strong wait-and-see sentiment among downstream buyers. Upstream and downstream buyers focused on supply under long-term orders, and alumina prices stabilized. In March, spot transaction prices in north China gradually declined, while transactions in south-west China became more active, with transaction prices showing a slight discount trend. The market sentiment turned bearish, and prices dropped slightly. Overall, Q1 prices moved rangebound around 3,330 yuan/mt.

In Q2 2024, domestic alumina prices rose significantly. In April, driven by macro sentiment and sanctions on Russian metals by the UK and the US, alumina futures prices surged. The demand for deliverable brands somehow boosted spot alumina prices in north China. By late April, some alumina refineries that had resumed production had mostly completed the process. Market rumors suggested that some producers might reduce production in May due to ore supply issues, leading to increased reluctance to sell among holders. The spot transaction prices rose significantly.

In May, the domestic spot market saw downstream procurement based on rigid demand, leading to active spot transactions. Due to resumption and output cut at domestic alumina refineries, and the fact that domestic mines had not yet resumed production, the short-term supply increase of alumina was limited. Holders were reluctant to sell, and prices remained firm, with spot prices continuing to rise significantly, reaching the highest price of 3,908 yuan/mt at H1. In late May, as the procurement based on rigid demand neared its end, market aversion to high prices gradually emerged, and the wait-and-see sentiment among downstream buyers intensified. Spot market transactions turned sluggish, and the price increase of spot alumina in both the north and south China slowed down. In June, the wait-and-see sentiment among downstream buyers intensified, with most urging upstream producers to fulfill long-term orders. Meanwhile, alumina producers continued to adjust production, resulting in limited overall supply increase. Holders remained reluctant to sell, and prices stayed firm, with spot prices fluctuating at a high level around 3,900 yuan/mt.

Overall, in H1 2024, there were few new alumina projects put into operation domestically, and mines in Shanxi and Henan showed no signs of resuming production. Although industry profits were high, the increase in alumina supply was limited. On the demand side, the resumption of aluminum smelters in Yunnan contributed to the main demand growth in H1, presenting a weak supply and strong demand. In H2, according to SMM statistics, approximately 1 million mt of new alumina capacity will be gradually put into operation in Q3, and approximately 2 million mt of new alumina capacity will be gradually put into operation in Q4 (assuming stable supply of raw materials). Meanwhile, on the demand side, there is also an expectation of increased production of aluminum. Therefore, in H2, domestic alumina will present a situation of increased supply and demand. Without considering imports and exports, the tight supply of alumina may change, and there is an expectation of a price correction for alumina.