High alumina prices to support aluminium prices

SHANGHAI, Apr 24 (SMM) – After aluminium prices fell as the US eased sanctions on Russia, SMM believes that prices are likely to gain some support from the high prices of alumina. 

Last week, traded prices for alumina stood at $800/mt in Brazil. Australian alumina prices surged to $710/mt fob on Thursday April 19, up $225/mt from April 13.

Output cuts of 50% at Norsk Hydro's Alunorte in Brazil since late February and a smaller supply of Russian alumina on the US sanctions accounted for the pickup in prices. SMM expects the cuts and sanctions to affect an estimated 319,000 mt of alumina output each month. 

The turning point for the upward trend in prices may emerge when Alunorte resumes full production. It is estimated that the company will require three months to return to full production. The growth in prices may also taper off when China's alumina exports are sufficient to meet overseas demand. 

China currently exports 30,000 mt of alumina each month, and the volume of exports is likely to surge further to 100,000 mt per month, SMM found in a survey. 

Average prices of alumina in China's four major markets also soared to stand at 3,135 yuan/mt on Tuesday April 24, 219 yuan/mt higher from last Friday. Buoyed by growing exports of alumina, offers in the domestic market climbed up as alumina producers and traders held back. However, smelters mostly purchased as needed.

Higher electricity costs, in line with China's plan to regulate coal-fired power plants, will also drive aluminium prices. 

Social inventories of refined aluminium dipped 17,000 mt to stand at 2.23 million mt on Monday April 23 from last Thursday. While high prices of aluminium deterred downstream buyers, it remains unclear if inventories will continue to shrink.

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