China’s Alumina Production Review In July And Forecast In August

SHANGHAI, Aug 9 (SMM) –

SMM data indicates that during July (spanning 31 days), China's metallurgical-grade alumina output reached 6.869 million mt. Daily production saw an increase of 6,600 mt to reach an average of 222,000 mt/day. This surge is attributed mainly to the phased release of newly added capacity, coupled with the conclusion of maintenance in several Guangxi region companies, leading to a gradual resumption of production and, consequently, an uptick in daily production. A comparison with the previous month's data reveals an additional production day in July compared to June, which resulted in a month-on-month total production increase of 6.3%.

An examination of the year-on-year data reveals a 1.5% increase in alumina production this July relative to the same period last year. This surge is primarily attributable to the input from newly commissioned alumina production capacities. Furthermore, the capacity utilization rates in regions with higher production costs have consistently remained at a low level throughout the year. As of the end of July, China's built alumina capacity reached a volume of 100 million mt, with an operational capacity of 81.08 million mt, culminating in a nationwide utilization rate of 81.1%.

In Shanxi province, the operation rate was recorded at 68.8%, marking a slight increase of 0.4% over the previous month. This persistently low figure can be primarily attributed to the constrained supply of domestically-sourced ores.

In Henan, specifically the Sanmenxia area, production of domestic ores has been suspended due to land reclamation policies, with no immediate prospects for resumption. Some companies have reported that the procurement of ores from the proximate Shanxi province is unlikely, given concerns over ore quality. The already soaring production costs make the use of imported ores unfeasible, hence the operation rate remained low at 64% in July, albeit a modest rise of 0.7% from the previous month.

In Guizhou, certain alumina refineries underwent scheduled maintenance in July. However, due to their well-structured adjustment plans, the maintenance period hasn't significantly impacted the month's production. The operation rate for the province held steady at 84.5%, consistent with the previous month.

In Hebei, the operation rate for July reached 93.1%, up by 2.5% from the previous month. This surge is primarily a result of the increased output from newly commissioned capacities in the region, which are anticipated to reach full production in the near future.

In Guangxi, the operation rate climbed from 86.2% in the previous month to 88.6%. This rise can be largely attributed to the resumption of production by certain companies following their maintenance period in July. However, due to issues related to ore availability, the operation rate remains low for some firms.

Lastly, Shandong province reported an operation rate of 94.1%, marking a notable increase of 3.7% from the previous month. This increase is primarily due to the consistent rise in output from new capacities in the region, coupled with the ongoing rebound in spot prices, thereby enhancing the propensity for production compared to earlier periods.

Forecast for August: It is anticipated that the new capacities in Hebei will gradually ramp up to reach full production in August. In contrast, due to issues related to ores and production costs, Henan might continue to curb production. While the continuous rebound in spot prices in Shanxi has increased the willingness of companies to boost production, there may be a tendency for downstream aluminum smelters to adopt a wait-and-see approach, leading to a weakening spot transaction. Thus, it's possible that these companies may maintain steady production levels.

In Guangxi and Guizhou, the resumption of production in southwestern aluminum smelters has stimulated a recovery in demand. However, considering the constraints in ore extraction faced by individual companies in the southwest, flexible production is anticipated to predominate.

Hence, SMM estimates an average daily production of 224,000 mt/day in August, with a total operational capacity of approximately 81.73 million mt/year.