Tight supply, high export profits to further drive up alumina prices

SHANGHAI, Apr 20 (SMM) – While LME aluminium surged nearly 30% on the US sanctions on Rusal since April 6, prices of alumina also soared with further upward room due to tight supplies and rising export margins, SMM believes. 

Average prices of alumina in China's four major markets stood at 2,916 yuan/mt on Friday April 20, 152 yuan/mt higher from last Friday, SMM data showed. Australian alumina prices stood at $710/mt fob on Thursday April 19, up $225/mt from last Friday. 

Production cuts of 50% at Norsk Hydro's Alunorte in Brazil since late February accounted for the higher prices. Aluminio Brasileiro SA, also known as Albras, will reduce production by half due to a lack of alumina supply from Alunorte. Albras sources all its alumina from Alunorte and currently produces 460,000 mt of aluminium annually. Production across Norway's aluminium smelters is likely to be affected as Alunorte is a critical source of alumina for them.

Alunorte's operating capacity currently stands at 3.2 million mt/year. No output resumption notice has been received from the local government. 

Relatively tight supplies and a bigger price gap between China and the overseas market are likely to see China's export of alumina surge. SMM learned that some market participants have already stocked up domestic alumina for future exports. Prices of alumina will also gain support from the larger margins at refined aluminium plants.

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