China's Gas Price Hike to Push Up Alumina Production Costs

SHANGHAI, Jul. 10 (SMM) – China’s first natural gas price hike in three years will push up production costs of alumina for some producers, SMM has learned.

The country’s National Development & Reform Commission (NDRC) raised the average natural gas prices for non-residential users to 1.95 yuan ($0.32) per cubic meter from 1.69 yuan per cubic meter, effective July 10. Gas prices for residential users will not change.

The NDRC also introduced a market-based pricing mechanism on incremental gas consumption over the previous year's level, with prices for excess consumption equal to 85% of that for alternative energy sources such as fuel oil and liquefied petroleum gas.

As 80-100 cubic meters of natural gas is needed to produce one ton of alumina, production costs will rise by 16-20 yuan per ton, assuming natural gas prices are hiked by 0.2 yuan per cubic meter, SMM learned from one alumina producer.

However, others told SMM that rising natural gas prices will have little effect on their production costs as fuel oil and coal are more often used for alumina production.

SMM’s earlier survey showed that alumina producers using natural gas are concentrated in Shanxi, Shandong and Guizhou provinces.