SHANGHAI, Feb 19 (SMM) – SMM retains the view that alumina prices will extend a rally in the near term as the scale of capacity cutback expands at alumina refineries and the imbalance between demand and supply has not improved considerably on the continued virus impact. 

Given the gradual recovery of logistics, the continuity of the price increase will be determined by the inventory level at aluminium smelters, alumina supply after the recovery of shipments at ports, and the resumption of suspended alumina plants. 

The amount of capacity cutback (including the affected roasting capacity) at Chinese alumina refineries due to the coronavirus outbreak has climbed to 4.6 million mt/year, with the domestic alumina capacity in operation falling to 62.21 million mt/year, according to a SMM survey as of February 18. 

Producers in Shanxi accounted for 3.8 million mt/year of the capacity reduction, and refineries in Henan took up 200,000 mt/year. An alumina refinery in Xiaoyi, Shanxi province, scaled back operations and kept only a line with capacity of 1.2 million mt/year in operation as of the morning of February 18, due to shortage of domestic bauxite and coal gas. 

Alumina refineries in north China that own mines and alkali plants and transport feedstock by the railroad are able to maintain stable operations with inventories of raw materials at normal levels, but alumina producers that rely on motor transport and supplies from privately operated mines have to cut production or suspend amid dwindling raw materials stocks. 

The automobile transport of coal from Shaanxi to Shanxi and Henan remained in low efficiency, which weighed on the coal stocks at alumina refineries. Feedstock supply was disrupted at some alumina plants in Henan that used to purchase lime from Hubei, the epicentre of the virus outbreak. Most private-owned mines in Shanxi and Henan have not recovered operations, and this affected the availability of domestic bauxite and the consumption of some refineries. 

In southwest China, meanwhile, the alumina capacity in operation barely impacted by the virus. Authorities in Guizhou removed transportation curbs between cities, counties, and villages on February 15, allowing production and shipments from local alumina refineries to recover and the shipping costs and transport capacity to normalise. 

On the demand front, some aluminium smelters continued to grapple with falling inventories of alumina. Some aluminium producers in northwest China raised their purchasing prices, and trades occurred at higher prices at ports. Some smelters turned to the overseas market and made enquiries actively, SMM learned. Some firms adjusted the shipping origins to reduce the impact of automobile transportation curbs and to lower the shipment costs. 

As of February 18, traded prices of alumina stood at as high as 2,520-2,540 yuan/mt in Shanxi, while alumina producers in Henan held cargoes back from the market, which resulted in muted trades.