Spot Alumina Prices Continue to Rise: How is Downstream Winter Stockpiling Progressing? [SMM Analysis]

SMM, November 20: Spot alumina prices have reached new highs. According to an SMM survey, as of November 14, domestic alumina operating capacity increased by approximately 4.69 million mt/year from the end of October to 87.82 million mt/year, with production seeing a slight uptick. However, in terms of supply and demand, alumina remains in a tight supply-demand balance, which is unlikely to change in the short term, providing strong support for spot alumina prices. The "alumina deficit" has persisted, while aluminum operating capacity continues to climb. So, where is the shortage? Mainly in inventory! From a supply-demand balance perspective, since April 2024, alumina has entered a slight deficit, pushing up spot prices. After the National Day holiday, the deficit persisted for an extended period, with aluminum smelter and alumina refinery inventories dropping to new lows. As winter approaches, aluminum smelters in north China, including Inner Mongolia, Qinghai, Gansu, and Xinjiang, need to stockpile for winter, increasing demand for alumina. Additionally, this year, long-term contract deliveries of alumina have been delayed, making the "alumina shortage" in north China more pronounced.

Typically, by November, winter stockpiling in north China is nearly complete. However, as of mid-November, winter stockpiling purchases by aluminum smelters are still incomplete and may continue. SMM has learned that some aluminum smelters in Inner Mongolia have inventories of 10-12 days, while others have only 4 days of alumina inventory, whereas normal winter stockpiling requires 10-15 days of alumina. Despite having long-term contracts, the execution has been poor, and these companies are urgently purchasing alumina. In Xinjiang, except for a few plants, most alumina inventories are not ideal, generally only 7-14 days. According to last year's Q4 survey, winter stockpiling needs to reach around 20-30 days, but the shortage of spot alumina makes stockpiling difficult.

In summary, winter stockpiling in the north is not yet complete, and other regions also face inventory shortages. With the heating season approaching, disruptions in alumina production are increasing. Under these circumstances, alumina supply is unlikely to see significant growth, and high overseas alumina prices make it difficult to supplement with imports in the short term. With tight supply, aluminum operating capacity continues to grow, the risk of aluminum production cuts in Yunnan is reduced, and demand is expected to maintain a slight upward trend. Combined with stocking demand, the alumina market fundamentals show a slight supply deficit, providing some support for spot alumina prices.