08-02 (Agencies) - China's spot alumina prices have risen 7-9 percent since June due to increased demand and strong aluminum prices, and traders and analysts say prices could rise further in the second half on speculative buying.
China is the world's top aluminum producer and has been ramping up its output of alumina, the main material for primary aluminum production.
"Alumina prices are likely to rise gradually in the second half," said Yang Xiaoguang, analyst at Jinrui Futures, adding that he expected aluminum prices in China to remain strong in the second half and that would support alumina prices.
Spot alumina traded in China at 2,750-2,900 yuan ($408.92 - $431.23) per ton this week, up from 2,550-2,650 yuan in early June.
Traders said speculators expecting higher Chinese alumina prices had built up stocks, cutting availability of the raw material in the spot market.
"People are speculating that alumina prices would rise. A lot of people are talking about buying and storing alumina using financing deals," a trader said.
Typically, more than 95 percent of the alumina produced in China is of a metallurgical grade, the remaining alumina output is chemical grade, used in abrasives, special glass, catalysts and other applications.
aluminum prices spiked last week, up more than 3 percent -- highest weekly gain since February 2010 -- due to steady demand and speculation.
The front-month of Shanghai aluminum SAFc1, which reflect spot prices in China, hit 18,660 yuan on Monday, the highest level since August 2008, before closing at 18,560 yuan.
Jinrui's Yang said about 1 million tons of primary aluminum capacity was set to come onstream in the second half of this year, increasing alumina demand by about 2 million tons. He did not provide any details on new alumina capacity planned to come onstream during the same time.
About two tons of alumina are needed for one ton of primary aluminum production in China.
State-backed research firm Antaike has forecast China's alumina capacity to rise to 46.44 million tons this year from 41.04 million tons in 2010.
Increased aluminum prices have driven up term alumina prices which are based on Shanghai front-month aluminum prices, traders and smelter sources said.