SMM comment: What are the drivers behind 26.34% spike in alumina futures prices in just two weeks?

SHANGHAI, Jan 3 (SMM) –Affected by factors such as tightening supply, alumina futures prices constantly refreshed new highs.

The prices of most-traded alumina futures contract has kept going up since reaching a new low of 2,828 yuan/mt on December 12, 2023. On January 2, the alumina prices have reached a new high of 3,588 yuan/mt since its listing. As of the yesterday's closing, the increase reached 7.97%. The alumina prices have increased for four consecutive days, with the largest increase in 14 trading days being approximately 26.34%.

Spot prices

Yesterday, the average spot prices of SMM alumina were reported at 3,154 yuan/mt, up 1.12% from the previous day, and ended in positive territory for the seventh consecutive trading day. SMM predicts that short-term domestic spot prices may run strongly.

According to SMM research, alumina prices were $347/mt FOB Western Australia as of December 28. The USD/RMB exchange rate was around 7.08, this price was equivalent to about 3,030 yuan/mt CIF major ports in China after counting in ocean freight of $21.85/mt, which was 89.05 yuan/mt lower than the domestic spot prices. The import window remain open. The latest overseas alumina transaction: 25,000 mt of alumina were traded at $361/mt FOB Vietnam on December 29, for shipment in the second half of January. The price was $5.5/mt higher than the previous transaction.

Supply

Bauxite: According to data last week, the weekly export volume of bauxite from Guinea ports was 2.2555 million mt, an increase of 392,900 mt WoW. The Guinea oil depot explosion on December 18, 2023 had little impact on bauxite shipments in the previous week. SMM will continue to pay attention to whether it will have a greater impact on subsequent bauxite production and shipments.

Import and export: According to customs data, China exported 133,200 mt of alumina in November and exported 1.1348 million mt from January to November. China also imported 129,000 mt of alumina in November, up 30.30% MoM, but down 34.22% YoY. Alumina imports totaled 1.5586 million mt from January to November, a YoY decrease of 17.83%. The net imports of alumina were negative 4,200 mt in November and stood at 424,900 mt from January to November.

According to SMM analysis, alumina prices at home and abroad have remained stable since the beginning of December. Alumina imports in December may increase from November’s level. Market players should keep a close eye on the trend of alumina prices at home and abroad.

SMM Outlook

In terms of fundamentals, the tight bauxite supply, environmental protection policies and other factors tightened the restrictions on alumina production capacity in the northern region, affecting spot supply. On the demand side, alumina producers held their offers firm and spot premiums remained high.

Recently, the market sentiment over the oil depot explosion in Guinea has eased. However, the tight supply of domestic ores and environmental protection issues in the north have affected the production of some alumina refineries, which has provided certain support for the alumina futures price. Market players should keep a close eye on the evolution of the ore supply situation in Shanxi and Henan regions and the impact of heavy pollution weather warnings in the northern region on the production of alumina producers.

SMM risk alert: After this sharp rise, investors need to be wary of the downside risks of current prices and take risk control measures.