Alumina Output Cuts Are Accompanied by Production Resumptions, Demand at Risks of Falling

SHANGHAI, Sep 5 (SMM) - Price review: As of last Friday, the SMM weighted alumina index stood at 2,949 yuan/mt, down 3 yuan/mt from a week ago. The alumina prices stood between 2,860-3,000 yuan/mt in Shandong, 3,000-3,050 yuan/mt in Henan, 2,860-2,930 yuan/mt in Shanxi (down 10 yuan/mt), 2,900-2,980 yuan/mt in Guangxi, 2,850-2,930 yuan/mt in Guizhou, and 2,950-3,000 yuan/mt in Bayuquan.  

Overseas market: Alumina prices FOB Western Australia slipped $2/mt from a week ago to $328/mt as of last Friday, which was equivalent to 3,023.7 yuan/mt CIF China and 74.97 yuan/mt higher than the domestic spot prices. The ocean freight stood at $50/mt. 

Domestic market: The overall transactions were sluggish last week. The supply side has experienced significant changes recently. An 800,000 mt/year alumina refinery in Chongqing was temporarily suspended in mid-August due to the power rationing, but began to resume its production at the end of August after the power supply was restored. Its production is expected to fully recover in mid-September. Another refinery in Chongqing with an annual capacity of 4 million mt reduced its capacity by 20% due to the power rationing, but gradually resumed its production in early September. One 900,000 mt/year refinery in Guizhou completed the maintenance of its roasting furnaces at the end of August, but it barely has any alumina available for sale in the spot market as it is now making up for delayed delivery of long-term orders. A refinery in Shandong shut down one 900,000 mt/year production line last week following an accident, which is estimated to cause a loss of 70,000-75,000 mt of output, with the production expected to resume in mid-to-late September.  A 900,000 mt/year refinery in Guangxi is currently operating at just half of its capacity due to bauxite shortages, and the production recovery will depend on when it can secure sufficient raw material supply.  

Price evolution: Aluminium smelters in Sichuan are now beginning to resume their production after the local power supply has been restored. However, Yunnan, another aluminium producing hub, has also suffered from hydropower shortages recently, triggering concerns over potential output reduction in the province. SMM’s latest survey showed that most of the aluminium smelters in Yunnan are currently in normal operations, but they have expressed concerns over the future power supply. Many aluminium smelters in Yunnan have recently undertaken orderly electricity consumption and drill of power load interruptions. As a major aluminium producing province that relies heavily on hydropower, the operations of aluminium smelters in Yunnan will have a significant impact on the entire aluminium industry. Alumina demand could be at risks of declining. On the supply side, there have been frequent output cuts by high-cost alumina refineries recently, while the commissioning of new alumina capacity was affected by multiple factors such as the supply of raw materials, hence the fears of a severe supply glut have somehow eased. Since the market is intertwined with bullish and bearish factors, alumina prices are expected to see only small fluctuations. SMM will keep a close eye on any disruption to the supply and demand side in the future.