Alumina's Slight Surplus Narrows; Downstream Shows Low Acceptance of High-Priced Alumina [SMM Morning Comment on Alumina]

SMM Alumina Morning Comment on January 2

Futures Market: On Tuesday's daytime session, the most-traded alumina 2502 futures contract opened at 4,844 yuan/mt, with a high of 4,858 yuan/mt and a low of 4,763 yuan/mt, finally closing at 4,797 yuan/mt, down 47 yuan/mt or 0.97%. Open interest stood at 141,000 lots, down 12,923 lots.

Industry Dynamics:

1. According to SMM data, the average tax-inclusive full cost of China's aluminum industry in December 2024 was 21,114 yuan/mt, up 3.9% MoM and up 32.0% YoY, mainly due to rising prices of raw material alumina, electricity, and auxiliary materials. The average spot price of SMM A00 aluminum in December 2024 (November 26 to December 25) was approximately 20,211 yuan/mt, with the domestic aluminum industry recording an average loss of about 911 yuan/mt, shifting from average profitability to losses.

2. Based on SMM data, China's metallurgical-grade alumina production in December 2024 (31 days) increased by 1.67% MoM and was up 9.80% YoY. As of December 31, China's existing capacity for metallurgical-grade alumina was approximately 103.02 million mt, while the actual operating capacity saw a slight decline of 0.44% MoM, with an operating rate of 86.30%. For the full year of 2024, domestic metallurgical-grade alumina production rose by 4.86% YoY. During the month, the operating capacity slightly pulled back due to environmental protection-related production cuts in Shanxi and maintenance of some capacity in Shandong. However, as downstream aluminum production also experienced cuts during the month, the slight surplus in alumina supply and demand persisted, albeit with a narrower surplus margin.

Spot-Futures Price Spread Daily Report: According to SMM data, on December 31, the SMM alumina index showed a premium of 917 yuan/mt against the most-traded contract's latest transaction price at 11:30.

Warehouse Warrant Daily Report: On December 30, the total registered warehouse warrants for alumina increased by 299 mt compared to the previous trading day, reaching 13,000 mt. The total registered warehouse warrants in Shandong, Henan, and Gansu regions remained unchanged at 0 mt, while Guangxi's total registered warehouse warrants also remained unchanged at 301 mt. In Xinjiang, the total registered warehouse warrants increased by 299 mt, reaching 12,000 mt.

Overseas Market: As of December 31, the FOB Western Australia alumina price was $670/mt, with an ocean freight rate of $22.45/mt. The USD/CNY exchange rate sell price was around 7.32. This price, converted to domestic mainstream port selling prices, was approximately 5,807 yuan/mt, 109 yuan/mt higher than domestic alumina prices, keeping the alumina import window closed.

Summary: On the supply side, domestic alumina operating rates remained high. Although some enterprises reduced roasting capacity due to winter environmental protection measures and maintenance, the significant profitability of alumina stimulated high enthusiasm for production increases among alumina refineries. Additionally, some alumina refineries slightly increased their operating capacity. On the demand side, downstream aluminum smelters faced severe losses, with some aluminum plants in south China undergoing minor maintenance and production cuts. Other aluminum plants had planned to complete technological transformations and resume production, but high raw material prices delayed the progress of resumption, leading to a slight decrease in demand. Overall, the tight supply situation for alumina has improved compared to before. However, buyers and sellers of alumina are still in a phase of negotiation. Suppliers maintain a sentiment to stand firm on quotes, while downstream players primarily execute long-term contracts and restock on dips, showing low acceptance of high prices. In the short term, prices are expected to remain stable with a slight downward trend.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make prudent decisions and not substitute this for independent judgment. Any decisions made by clients are not related to SMM.]