From May 13 to June 11, the average SMM alumina index was 3,828 yuan/mt, up 422 yuan/mt MoM; the monthly average alumina prices FOB Western Australia were $446/mt, up $58/mt MoM.
Overseas: As of June 11, alumina prices FOB Western Australia were $495/mt, with ocean freight at $30/mt, and the USD/RMB exchange rate selling price around 7.27. This price is equivalent to approximately 4,393 yuan/mt CIF major ports in China, higher than the domestic spot prices by 487 yuan/mt. The alumina import window remained closed during this period as overseas alumina prices soared. Alcoa has fully cut production at its Kwinana alumina refinery in Western Australia, with the plan coming into effect in Q2 and aiming to completely halt production by June this year. The existing capacity of the Kwinana alumina refinery is 2.2 million mt. Additionally, the impact of natural gas shortages at Rio Tinto's alumina refinery continues, resulting in tight supply and rising prices in the overseas market. During the same period, domestic spot prices also soared, climbing from 3,691 yuan/mt in early May to 3,906 yuan/mt, an increase of 5.82%. Since mid-March, the spot alumina import window has remained closed, with the highest loss on spot imports reaching 487 yuan/mt as of June 11. In the month, market activity for overseas spot transactions was generally brisk, with SMM inquiring about five spot transactions. The most recent deal was for 30,000 mt of Eastern Australia alumina at $510/mt FOB, with a shipping schedule in late July.
In mid-May, as domestic mines in Shanxi and Henan had not yet resumed and the spot import window for alumina remained closed, there was no significant increase on the alumina supply. On the demand, the resumption of production in Yunnan steadily progressed, releasing positive demand signals. In the futures market, alumina prices hit a high again, and the arbitrage space, together with the expansion of the alumina futures delivery warehouse capacity, boosted demand for deliverable alumina. Overall, the alumina market saw weak supply and strong demand, and spot alumina prices continued to rise. In late May, due to output cuts at overseas alumina refineries, some imported bauxite spot flowed into the Chinese market. At the same time, some mines in Shanxi resumed, and this increase in bauxite supply slightly raised the operating rate of alumina refineries in Shanxi and Henan. On the demand, the resumption of production in Yunnan steadily progressed, releasing positive demand signals. Both alumina supply and demand increased, and the tight balance did not change significantly. However, due to high alumina prices, downstream purchases were driven by rigid demand, and the wait-and-see sentiment was strong. Spot alumina prices moved rangebound later in the month.
Overall, although the recent operating rate of alumina refineries rose, the short-term increase in alumina supply is limited due to the fact that domestic mines have not yet resumed production. On the demand, an SMM survey showed that the operating aluminum capacity in China continued to rise, with the remaining capacity in Yunnan steadily resuming production. Additionally, the third phase of the Huayun aluminum project in Inner Mongolia is expected to continue to be put into operation. By the end of June, the annualised operating capacity of domestic aluminum is expected to increase by about 300,000 mt MoM to 43.27 million mt. Currently, both alumina supply and demand are increasing. SMM predicts that the tight balance of domestic alumina in June is unlikely to change significantly. Amid bullish and bearish factors, the trend of alumina prices awaits further guidance from fundamentals. In the short term, spot alumina prices are expected to move rangebound, and we need to pay attention on the increase of domestic and overseas bauxite supply.
