South China Metals Summit 2019: China alumina to be in ‘tangible surplus’ in Q4-Shanghai Metals Market

Hot Keywords

  • Zinc
  • Nickel
  • MMi Iron Ore Port Index
  • Inventory data
  • Futures movement
  • Aluminium
  • Xiexin new energy
  • Rare earths
  • Evening comments
  • price
  • Stainless steel spot
  • Smog alert
  • Morning comments
  • Copper
  • Sales data

South China Metals Summit 2019: China alumina to be in ‘tangible surplus’ in Q4

SMM Insight 05:17:23PM Nov 07, 2019 Source:SMM

FOSHAN, Nov 7 (SMM) – China’s alumina market looks set to flip into a “tangible surplus” in the fourth quarter of this year, as the import arbitrage window opens and newly-commissioned capacity domestically ramps up, said Liang Xuan, senior aluminium analyst at SMM.

This will come despite the commissioning postponement of a slew of new projects. Jingxi Tiangui’s 800,000 mt and SPIC Jinyuan’s 1 million mt will be put off to the first quarter of 2020.

In September, metallurgical-grade alumina supply in China was in a slender surplus of 2,000 mt, as the recovery of idled capacity fell short of expectations and as some refineries cut production, Liang told delegates at the South China Metals Summit 2019 in Foshan, Guangdong province on Thursday November 7.

Alumina capacity in China is estimated to expand by 2.5 million mt on an annualised basis in 2019, and 6.2 million mt in 2020. There are 83.6 million mt of alumina capacity built in China, with 70.94 million mt of metallurgical-grade capacity in operation.

The closure of the export arbitrage window, meanwhile, will exacerbate the supply overhang. Supply jump overseas on the ramp-up of Emirates Global Aluminium (EGA)’s 2 million mt refinery in Abu Dhabi and the resumption of Hydro’s 3.2 million mt plant in Brazil, knocked Australia FOB prices to $280/mt, down from $323/mt at the end of June.

The weaker markets overseas turned China’s net alumina imports into positive territory. China saw net alumina imports of 458,000 mt in the first eight months of 2019.

Oversupply is set to pull alumina prices further lower, sapping support to aluminium prices. The hit on aluminium producer margins, however, will be cushioned by falling inventories, keeping producer margins from plumbing a bottom in the short term. The fall in aluminium prices will come earlier than that in producer margins.

Liang expects that social inventories of primary aluminium ingots in China will fall to 700,000-750,000 mt by the end of the year, compared with 853,000 mt as of November 7.

Property will put a floor under aluminium consumption, Liang added. In 2019, aluminium consumption in China’s building sector is expected to rise 2% from 2018 to 9.47 million mt, while that in transport will likely see a drop of 13.52% to 6.79 million mt.

Overall aluminium consumption in China is expected to dip 1.48% this year.

South China Metals Summit 2019: China alumina to be in ‘tangible surplus’ in Q4

SMM Insight 05:17:23PM Nov 07, 2019 Source:SMM

FOSHAN, Nov 7 (SMM) – China’s alumina market looks set to flip into a “tangible surplus” in the fourth quarter of this year, as the import arbitrage window opens and newly-commissioned capacity domestically ramps up, said Liang Xuan, senior aluminium analyst at SMM.

This will come despite the commissioning postponement of a slew of new projects. Jingxi Tiangui’s 800,000 mt and SPIC Jinyuan’s 1 million mt will be put off to the first quarter of 2020.

In September, metallurgical-grade alumina supply in China was in a slender surplus of 2,000 mt, as the recovery of idled capacity fell short of expectations and as some refineries cut production, Liang told delegates at the South China Metals Summit 2019 in Foshan, Guangdong province on Thursday November 7.

Alumina capacity in China is estimated to expand by 2.5 million mt on an annualised basis in 2019, and 6.2 million mt in 2020. There are 83.6 million mt of alumina capacity built in China, with 70.94 million mt of metallurgical-grade capacity in operation.

The closure of the export arbitrage window, meanwhile, will exacerbate the supply overhang. Supply jump overseas on the ramp-up of Emirates Global Aluminium (EGA)’s 2 million mt refinery in Abu Dhabi and the resumption of Hydro’s 3.2 million mt plant in Brazil, knocked Australia FOB prices to $280/mt, down from $323/mt at the end of June.

The weaker markets overseas turned China’s net alumina imports into positive territory. China saw net alumina imports of 458,000 mt in the first eight months of 2019.

Oversupply is set to pull alumina prices further lower, sapping support to aluminium prices. The hit on aluminium producer margins, however, will be cushioned by falling inventories, keeping producer margins from plumbing a bottom in the short term. The fall in aluminium prices will come earlier than that in producer margins.

Liang expects that social inventories of primary aluminium ingots in China will fall to 700,000-750,000 mt by the end of the year, compared with 853,000 mt as of November 7.

Property will put a floor under aluminium consumption, Liang added. In 2019, aluminium consumption in China’s building sector is expected to rise 2% from 2018 to 9.47 million mt, while that in transport will likely see a drop of 13.52% to 6.79 million mt.

Overall aluminium consumption in China is expected to dip 1.48% this year.