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LME Week: Cost push to benefit aluminium prices in 2018/2019 winter
Oct 9,2018 12:24CST
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Source:SMM
But upward room will be limited by new capacity and potential restarts of idled facilities

London, Oct 8 (SMM) – Aluminium prices in China will benefit from the cost push in alumina and anodes in the upcoming winter, said SMM general manager Ian Roper at LME week in London on Monday October 8. 

However, upward room will be limited by new capacity and potential restarts of idled facilities, he added. 

The impact of winter cuts on alumina is likely to exceed the 4.5 million mt affected last winter, and this will keep the market tight as aluminium cuts will be minimal, Roper told delegates at LME week. From this month till the end of March 2019, more impactful winter cuts will be felt in alumina refineries as these are running at high utilisation rates, he explained. 

China has 5.43 million mt of new alumina capacity under construction, while the new capacity may be delayed by a supply shortage of domestic bauxite. He said that domestic bauxite output has been hit by environmental inspections, and imports are up strongly. 

On bauxite shortages, six refineries in Henan and Shanxi province announced capacity cuts and maintenance in July, affecting annual capacity of alumina by over 3 million mt. Domestic bauxite price stabilised as imported bauxite increased, but internal logistics costs for imports remain high.

He said that growth rate of China’s aluminium output remains down on a yearly basis, in response to low prices and margins which have limited post-winter capacity restarts and new capacity starts. 

Inventory has been drawing from a record high in March this year, though destocking slowed in July and August. Output will need to be incentivised by margin recovery, he believed. 

He forecasted that China’s aluminium output will rise just 1.9% in 2018, and to rise 4.1% in 2019, as new capacity is added. China’s aluminium consumption is expected to increase 5.3% in 2018, and 3% in 2019.

LME week

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