Domestic spot alumina prices stabilized, with a tight balance supporting high spot prices

From June 11 to July 10, the average price of the SMM alumina index was 3,904 yuan/mt, an increase of 76 yuan/mt MoM; the monthly average price of FOB Western Australia alumina was $505/mt, an increase of $59/mt MoM.

Overseas: As of July 10, the FOB Western Australia alumina price was $493/mt, with ocean freight at $28.35/mt, and the USD/RMB exchange rate selling price was around 7.28. This price is equivalent to approximately 4,369 yuan/mt CIF major ports in China, higher than the domestic spot prices by 466 yuan/mt. The alumina import window remains closed, and overseas alumina prices continued to go up in late June. According to SMM data, Australia's alumina output in June was 1.43 million mt, a decrease of 8.3% YoY, mainly due to Alcoa's Kwinana refinery and Rio Tinto's Yarwun refinery. Alcoa announced in early 2024 that the Kwinana alumina refinery would be completely shut down in Q2. SMM estimates that the output of this refinery in June decreased by about 85% YoY, with an average capacity utilization rate of about 8%. Additionally, the explosion of the Queensland natural gas pipeline in March 2024 affected the operations of Rio Tinto's Gladstone business, reducing the capacity utilization rate of the Yarwun alumina refinery to about 73%. In July, overseas alumina prices saw a slight decline. According to SMM data, India's alumina output in June was 655,000 mt, an increase of 6.9% YoY. The increase mainly came from Vedanta's Lanjigarh alumina refinery. Vedanta announced in early April 2024 that the refinery's capacity would be increased from 2 million mt to 3.5 million mt, expanding to 5 million mt in the future. SMM estimates that the refinery's output in June increased by 56,500 mt YoY and is expected to grow further in the future, with no significant changes in demand. Overall, the output of overseas metallurgical-grade alumina in June decreased slightly by 0.3% MoM and increased by 0.7% YoY. The activity of spot transactions in the overseas market was average. SMM inquired about 5 spot transactions, with the most recent one being Indonesian alumina sold at $487.02/mt FOB for 30,000 mt, with a shipping schedule in late July, a decrease of $9.98/mt.

In mid-June, some aluminium smelters in south-west China entered the market to purchase spot for restocking, with transaction prices showing a small premium, providing some support for south-west China alumina prices. At the same time, alumina futures prices fell, and some warrant sources in north China were traded at a discount to the average price, resulting in price differences between the north and south. The nationwide average price of alumina dropped slightly. In late June, the wait-and-see sentiment among downstream buyers increased, mainly urging upstream to execute long-term orders. Meanwhile, alumina producers had both production increases and decreases, with limited increase in overall supply. Sellers were reluctant to sell, and prices remained firm, with spot prices fluctuating around the high level of 3,900 yuan/mt. In early July, a small amount of warrant sources were traded in Xinjiang, with the main transaction parties being alumina refineries and traders. The goods were destined for aluminium smelters in north-west China, with transaction prices at a premium of 400 yuan/mt to the 2408 contract price. According to SMM, this transaction was for an alumina refinery to procure for long-term order delivery. Additionally, some traders entered the market to purchase alumina spot in Shanxi for long-term order delivery, with transaction prices at 3,900 yuan/mt.

Overall, the activity in the spot alumina market increased compared to the previous period. Some alumina refineries and traders entered the market for procurement based on rigid demand to fulfill long-term orders, with actual transaction prices narrowly fluctuating. On the supply side, with some new and resumed capacities gradually putting into operation, the spot supply of alumina will see a slight increase. On the demand side, the third phase of Huayun in Inner Mongolia is gradually reaching full production, and the projects under technical renovation in Sichuan will also gradually resume production. SMM expects that by the end of July, the operating capacity of domestic aluminium will increase by 153,000 mt MoM, leading to positive demand for alumina. Under increase in supply and demand, SMM believes that domestic alumina supply and demand will remain balanced, with spot alumina prices mainly fluctuating. Continuous attention is needed on the progress of alumina refinery resumption and the stability of ore supply.