SHANGHAI, Aug 12 (SMM) - The average monthly SMM alumina price stood at 2,967 yuan/mt (from July 12 to August 10), up 10 yuan/mt from the previous month. As of August 10, the SMM regionally weighted alumina price index stood at 2,964 yuan/mt. The prices were offered between 2,950-3,050 yuan/mt in Shandong, 2,980-3,050 yuan/mt in Henan, 2,880-2,930 yuan/mt in Shanxi; 2,940-3,010 yuan/mt in Guangxi, 2,880-2,940 yuan/mt in Guizhou; 3,050-3,150 yuan/mt in Bayuquan.
As of the time of this writing, alumina FOB Western Australia stood at $330/mt, down 10.1% compared with $367/mt at the beginning of July; or 2,953 yuan/mt CIF major Chinese ports with the ocean freight of $46/mt, down 11 yuan/mt with domestic prices. One deal was tracked overseas in July with a volume of 30,000 mt sold at a price of $332/mt FOB East Australia on July 8. The shipping is scheduled in early August, and the destination is unknown. The import window has been closed for nearly 6 months since February 18 this year, which finally reopened in July. However, before the SHFE/LME price ratio rose to a substantial high, there will be few opportunities for arbitrage. Hence the overall transactions were poor except for those with long-term orders.
In China, alumina prices trended in both directions in different places, and the performance of the north and south markets was quite different.
Alumina prices rebounded mildly in the north in mid-July amid high cost. Some alumina refineries in north China had to reduce production (with an annualised production capacity of about 3.3 million mt) because they could not accept high-priced imported ores, and were unable to secure sufficient domestic ores either. Therefore, the circulation of spot alumina in the northern region tightened. Alumina prices in both Shanxi and Henan rebounded, though limitedly. The main reason was that the aluminium smelters began to put pressure on alumina prices when aluminium prices dropped nearly 1,600 yuan/mt from the beginning of July to 17,200 yuan/mt, which led to greatly falling profits of the smelters. However, alumina refineries in north China boycotted such price cuts amid extending losses, and the game between the seller and buyer intensified. The traders also stood on the sidelines before the prices found the direction, and completely lost the interest in building stocks. In south-west China, with the new alumina capacities ramping up the production in Guangxi and Chongqing, the local alumina prices were under pressure and ushered in a correction.
In late July, the market transactions were think and the prices remained stable. The market also turned quiet after the market players gradually digested the news of production reduction in north China. Due to the high cost in the northern region, the refineries were less motivated to produce amid contracting profits and expanding losses, and they mainly maintained the delivery of long-term orders, with few sources available ale in the spot market. As such, alumina prices were generally firm ranging 2,950-3,050 yuan/mt, and the traded prices mostly fell into the range of 2,900-3,000 yuan/mt. Spot transactions in the south-west region were thin as well, and the prices stabilised.
There were rumours that a refinery in the north might reduce or stop the production due to environmental protection reasons (involving a capacity of 3 million mt) around the end of July and early August, which led to an increase in inquiries in the local market. However, as of the time of this writing, this refinery has not yet stopped the production, and the supply side did not change much either, easing market panics. In this case, the transactions gradually return to rationality, and downstream acceptance of high-priced alumina is extremely limited. The spot market is well supplies in south-west China. In addition, local refines preserved some profits compared with those in north China, and were less firm to their prices, leaving some spaces for bargaining.
On the whole, there was no large supply shortage in north China, and prices have been lowered to some extent as the buyers were not in a rush to restock. However, the wrestling between the seller and buyer will extend amid high cost borne by the sellers. In south-west China, with the commissioning of new alumina capacities, local supply has been rising steadily, and sources available in the spot market has also picked up. Therefore, transactions with lower prices can be expected. It is expected that in August, domestic alumina will extend the market dynamics with prices stabilising in north China and dropping slightly in south China.