Alumina Prices Continued to Diverge between North and South China due to Different Fundamentals

SHANGHAI, Jul 18 (SMM) – As of last Friday, the SMM weighted alumina index stood at 2,964 yuan/mt. The prices in Shandong were flat between 2,950-3,050 yuan/mt, those in Henan gained 5 yuan/mt to 2,980-3,070 yuan/mt, those in Shanxi climbed 10 yuan/mt to 2,870-2,920 yuan/mt, those in Guangxi were unchanged at 2,950-3,010 yuan/mt, while those in Guizhou dropped 5 yuan/mt to 2,880-2,960 yuan/mt, and those in Bayuquan were stable at 3,100-3,150 yuan/mt.

Alumina prices FOB Western Australia fell $22/mt from a week ago to $333/mt as of last Friday, which was equivalent to 3,039.6 yuan/mt CIF China and 75.9 yuan/mt higher than the domestic spot prices. The ocean freight slid $5/mt to $55/mt. Overseas prices kept falling amid abundant supply. With the price difference between the domestic and overseas markets beginning to narrow to a reasonable range, the import window has shown signs of opening.

The production of some alumina refineries in north China is expected to recover to pre-maintenance level this week, involving a combined annual capacity of 1.5 million mt. However, another 3.3 million mt/year of capacity may not be resumed any time soon due to expensive imported bauxite and insufficient domestic ore. Tightening supply shored up alumina prices in Shanxi and Henan, but the rise was limited as aluminium smelters who reported thin profits or even losses drove a hard bargain. Alumina refineries were reluctant to make big concessions due to deepening losses. Due to the uncertainty over future prices, traders maintained a wait-and-see attitude, with little intention to stock up. As the bauxite shortages in north China are unlikely to be alleviated in the foreseeable future, local alumina refineries may be forced to curtail their production further.

In south-west China, alumina prices inched lower due to the release of new capacity in Guangxi and Chongqing. Bosai Wanzhou, together with Tiangui’s Phase II and Phase III projects are releasing about 350,000 mt of alumina into the spot market per month, shocking the local prices.

It’s worth noting that the operating rates of domestic aluminium smelters hit a record high this year, and the operating capacity has now exceeded 41 million mt. According to SMM’s estimates, the domestic alumina market will only see a slight surplus of 763,000 mt this year. As such, alumina prices may not experience sharp rise or fall. However, if aluminium prices keep falling, alumina prices will face downward pressure as well.