Short-Term Alumina Price Outlook Remains Bullish on Rising Cost and Supply Disruptions Overseas

SHANHGAI, Aug 30 (SMM) – As of August 27, the SMM weighted average alumina price stood at 2,757 yuan/mt, up 90 yuan/mt from a week ago, with prices standing at 2,750-2,800 yuan/mt in Shanxi, 2,800 yuan/mt in Henan, 2,560-2,600 yuan/mt in Guangxi and 2,580 2,620 yuan/mt in Guizhou.

Two transactions were heard from the overseas market last week. One deal for 30,000 mt of alumina was done at $305/mt FOB Western Australia, for shipment in late September. Another deal for 35,000 mt of alumina was done at $320/mt FOB, for shipment in September.

Alumina prices climbed across all regions. With increasing shipments from south China to north China, alumina prices in the north have had bigger impact on prices in the south.

Domestic operating alumina capacity has risen slightly from the beginning of the month. Some alumina plants in Shanxi and Henan increased production slightly by relying more on imported bauxite. SMM estimates that the current full cost in Henan is close to 2,800 yuan/mt. Higher costs bolstered alumina prices in a tightly balanced market.

The overseas alumina market saw supply disruptions. The Jamalco alumina plant with an annual production capacity of 1 million mt suspended production last week following a fire accident. Alcoa’s Alumar alumina plant, which has an annual production capacity of 3.5 million mt, reduced output by one-third due to technical problems in mid-July, affecting approximately 1.2 million mt of annual capacity. These two alumina plants are unlikely to resume production for the foreseeable future, which translates into a monthly (31 days) output impact of 187,000 mt.

Falling supply and high ocean freight have encouraged overseas buyers to purchase, sending overseas alumina prices higher. Assuming that the supramax ship freight is $55/mt, alumina prices of $320/mt FOB Western Australia is equivalent to 2,830 yuan/mt CIF at China's major ports. Prices in Bayuquan, Liaoning, rose to 2,800-2,830 yuan/mt.

In the short term, rising domestic costs and falling overseas supply will continue to send alumina prices higher.