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Sharp Declines in Alumina Imports May Push up Alumina Prices in Short Term
May 14,2010 16:12CST
smm insight

SHANGHAI, May 14 (SMM) -- According to the preliminary import and export data from China Customs, China's imports of alumina were only 150 kt during April, setting a new low since 2001, and far lower than the average monthly imports of 530.8 kt during the first three months of 2010, while average monthly imports were 428.4 kt during 2009.  SMM believes the higher international prices for spot alumina were the major reason behind sharp declines in China's imports of alumina.

Domestic alumina market remained stable since the start of 2010, and the relatively sufficient supply helped keep alumina prices stable around RMB 2,800/mt.  However, overseas alumina producers experienced significant production cuts, tightening alumina supply in a small area.  In this context, alumina spot prices began to rise supported by speculators and rising sea freight charges, with prices for alumina from Australia reaching USD 350/mt on a FOB basis, and with the latest alumina tender prices offered by NALCO (National Aluminum Co., Ltd.) at USD 378/mt.  The international alumina prices were much higher than domestic prices, allowing a number of domestic enterprises to sell their long-term alumina contracts in overseas markets and to purchase goods in domestic markets.  As long-term alumina contracts enjoy 2-3 months of shipment period, and domestic enterprises have sold long-term alumina contracts in international markets for 2-3 months, so SMM predicts China's imports of alumina will be relatively lower in May and June.

Most new alumina capacity will come online in 2H 2010, while a number of new aluminum projects will become operational at the end of 2Q, and purchases of alumina in preparation for these new aluminum projects have begun recently.  As a result, domestic alumina market will be in short supply associated with sharp declines in China's April alumina imports.  Meanwhile, the internal alumina inventories at aluminum producers are much lower than late 2009 levels after three-month consumption.  In this context, any additional market news may push up alumina prices in the short term.  However, SMM believes the upward room and the sustainability of alumina price increases will be limited in view of materialization of new alumina capacity in 2H 2010.     


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