Higher costs of alumina, prebaked anode buoy aluminium price

SHANGHAI, Aug 29 (SMM) – Aluminium prices have risen from August 20, driven by higher costs of alumina and prebaked anode, SMM believes. Tight supplies overseas and growing prices of raw materials accounted for gains in costs of alumina and prebaked anode.

The higher costs are expected to continue to bolster prices of aluminium in the short to medium term. Earlier-than-expected production limits for the upcoming heating season and high consumption in September will also account for higher prices of aluminium.

As of August 28, alumina prices across four major production areas averaged 3,275 yuan/mt, up 77 yuan/mt from a week ago, and up 314 yuan/mt from August 9 when prices began to climb, SMM assessed. Prices of Australian alumina also gained $45/mt from a week ago to stand at $610/mt fob as of August 28. 

Short supplies overseas grew demand for Chinese exports. Workers continued their strike at Alcoa refinery plants and bauxite mines in western Australia.

Rising prices of raw materials such as petroleum coke and asphalt, grew prices of prebaked anode. This also accounted for the positive momentum in the aluminium market. As of August 28, prices of petroleum coke increased over 300 yuan/mt July, with asphalt gaining over 400 yuan/mt. These raised the cash costs of prebaked anode by 355 yuan/mt, to 3,305-3,505 yuan/mt. 

On demand, a new round of restocking of prebaked anode for the 2018/2019 winter began this month. As China's largest purchasing company for prebaked anode, Weiqiao Group will continue to raise its September’s purchasing price, following an upward adjustment of 180 yuan/mt for August. 

The final purchasing price remains under negotiations. The Group planned to raise the price by 220 yuan/mt for next month, but met opposition from all domestic producers who demanded even higher prices. SMM expects Weiqiao to make a bigger upward adjustment by over 300 yuan/mt from levels in August, which stood at 3,280 yuan/mt in cash and 3,315 yuan/mt on acceptance.

The SHFE aluminium 1870 contract started to climb on August 20, from levels below 14,400 yuan/mt, to approach 15,000 yuan/mt as of Wednesday August 29.