SHANGHAI, Mar. 18 (SMM) -
SRB Offered RMB 15,137/Mt Opening Bid Price for Aluminum Ingot
The State Reserve Bureau (SRB) conducted its second round of aluminum ingot purchase via bid invitation in Beijing on March 15. The opening bid price was RMB 15,137/mt. Six aluminum producers won the bidding: Aluminum Corporation of China, China Power Investment Corporation, Henan Wanji Aluminum, Yunnan Aluminum, Qinhai Qiaotou Aluminum & Power and Henan Shenhuo Group. The SRB bought a total of 300,000 mt of aluminum ingot.
Higher Rail Freight Rates Push Alumina Prices for Delivery to Factory Up
The National Development & Reform Commission and Ministry of Railways revised the rail freight rates up by RMB 0.015 per metric ton-kilometer, effective February 20, 2013.
A large number of alumina traders concentrate in Shanxi, helping ease tight cash flows confronted by local aluminum smelters. One trader informed SMM that its company purchases alumina in Shanxi and then ships it to aluminum smelters in Gansu, Qinghai and Inner Mongolia, with freight charges borne by the seller. Margins at local traders used to be less than RMB 100/mt, but are now almost zero because of the hike in rail freight rates. In this context, traders were forced to raise alumina prices for delivery to the factory.
Growing Imports of Guinea Bauxite Push Up Costs for Chinese Alumina Producers
Shandong Nanshan Alumina Plant began to import bauxite from Guinea last December, the first plant in China to import Guinea bauxite. China’s imports of Guinea bauxite soared from 50,000 mt in December, 2012 to 340,000 mt in January 2013.
Three Chinese enterprises imported bauxite from Guinea in January. The CIF price for Guinea bauxite dropped from USD 80/mt to USD 77/mt, but was still higher than that for Australian and Indonesian bauxite.
Chinese alumina producers are seeking other bauxite sources to mitigate potential raw material shortages resulting from China’s largest bauxite supplier – Indonesia’s restrictions on bauxite exports. Chinese producers are eyeing bauxite in Guinea, but exorbitant freight charges will push up CIF price of Guinea bauxite, leading to higher production costs for domestic alumina producers.
Xinfa Group Expects China’s Aluminum Demand to Grow 5% in 2013
Zhang Xuexin, Chairman of Shandong Xinfa Group, China’s fourth largest aluminum producer in terms of capacity, predicts that aluminum demand in China will grow 5% in 2013, compared with 9% in 2012.
Mr Zhang said that Chinese aluminum producers have delayed some new projects as current aluminum prices are below RMB 16,000/mt, which is the dividing line between loss and profit (prices above this mark indicate profits, while prices below it suggest losses). He added that producers will have little other option than to cut production on a large scale provided that aluminum prices drop further.
He expects operating rates at Chinese aluminum smelters to fall to 80% this year.