SHANGHAI, Oct. 17 (SMM)－Up to Oct.16th, Henan Province, Binzhou and Zibo city of Shandong Province have introduced the time of production limit and the number of limited production line. As per knowledge of each plants. SMM calculates the capacity of limited production. The government asks for annual 10.34 million tonnes production limit. Concerning the operative conditions, the actual annual capacity to be limited is 8.2 million tonnes. What need to be focused is whether Shanxi Province will follow Henan Province to introduce a provincial production limit rather than limits in “2+26” cities. The alumina output of Shanxi is the second largest in China, following Shandong, so the green policies in Shanxi will greatly affect alumina price. Currently the non- “2+26” city Jinzhong in Shanxi Province released a 30% production limit of alumina on heavily polluted days during heating season. As per SMM knowledge, Shanxi province is very likely to do a provincial green policy, which has not been proved by absolute evidence.
Regarding capacity change of Alumina during heating season. It is estimated the shrinkage of supply side will increase to over 2.5 million tonnes. The newly-increased or recovering capacity is estimated to reach 1.5 million tonnes. Hence the net reduced capacity is 1 million tonnes. So irrespective of production limit in Shanxi Province, the reduction of alumina output has exceeded that of electrolytic aluminium during heating season. Besides, regarding the operation of capacity, the supply of alumina is expected to be tight.
About market’s opinion toward the price.
Bearish people toward alumina price think:
1. The profits of alumina have surged over 20% with its price while the price rise of aluminium ingot is very weak. Huge increase of cost will greatly cut down profits of electrolytic aluminium, even leading to loss of enterprises. With up and down of profits, smelting plants will reduce procurement and inventories of alumina, leading retracement of its price.
2. The transaction volume of alumina during September and October has overdrawn in advance some demand of alumina during upcoming heating’s season.
Bullish people toward the price the production limit of alumina during heating season will cause its short supply. And despite high price now, there are some transaction which support the price rise of alumina.
SMM comprehensive analysis: Basically speaking, SMM predicts despite existence of a forced market caused by reduction of alumina profits, which may influence rise of its price, the short supply and continuity of procurement will become the main factors to support the price rise of alumina. SMM predicts the targeted price of alumina in October is 4,000 yuan per tonne.
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