SMM Morning Comment on Alumina 1.24
Futures Market: During the night session, the most-traded alumina 2502 contract opened at 3,668 yuan/mt, hit a high of 3,689 yuan/mt and a low of 3,641 yuan/mt, and finally closed at 3,660 yuan/mt, down 58 yuan/mt or 1.57%, with an open interest of 35,800 lots.
Industry Dynamics:
- This week, the operating rate of leading downstream aluminum processing enterprises in China continued to drop sharply by 6.3 percentage points WoW to 51.1%. This week marked the last trading week before the Chinese New Year, and operating rates across aluminum processing sectors generally declined due to the holiday. The operating rate of primary aluminum alloy fell to 51%, with some enterprises slowing production or conducting maintenance, and further production cuts are expected during the holiday. Downstream customers in the aluminum plate/sheet and strip and aluminum foil sectors have completed stockpiling, leading to sluggish transactions and lower operating rates, though normal production is expected to continue during the holiday. As the holiday period is concentrated this week and next week, the operating rates of wire and cable, profiles, and secondary alloy sectors saw larger declines and are expected to continue to drop significantly next week. Overall, all downstream aluminum sectors were significantly impacted by the Chinese New Year break, with operating rates weakening notably. According to SMM forecasts, the operating rate of leading downstream aluminum processing enterprises in China is expected to drop further by 7.5 percentage points next week to 43.6%.
- Overseas Alumina Transactions: On January 23, two alumina transactions were reported overseas:
1) Vietnam sold 25,000 mt of alumina at $566/mt FOB Go Dau, Vietnam, for shipment in late February/early March;
2) India sold 30,000 mt of alumina at $566/mt FOB Visakhapatnam, India, for shipment in early March.
Spot-Futures Price Spread Daily Report: According to SMM data, on January 23, the SMM alumina index showed a premium of 392 yuan/mt against the most-traded contract's latest transaction price at 11:30.
Warehouse Warrant Daily Report: On January 23, the total registered warehouse warrants for alumina decreased by 3,907 mt from the previous trading day to 34,000 mt. The total registered warehouse warrants in Shandong remained unchanged at 901 mt, in Henan at 12,000 mt, in Guangxi at 0 mt, in Gansu at 0 mt, and in Xinjiang decreased by 3,907 mt to 21,000 mt compared to the previous trading day.
Overseas Market: As of January 23, the FOB Western Australia alumina price was $573/mt, with ocean freight at $19.95/mt. The USD/CNY exchange rate sell price was around 7.30, translating to an external selling price of approximately 4,972 yuan/mt at major domestic ports, 876 yuan/mt higher than domestic alumina prices. The alumina import window remains closed.
Summary: This week, the weekly operating rate of alumina remained fluctuating at highs, with no significant reduction in alumina supply observed. As the Chinese New Year break approaches, spot alumina transactions were relatively sluggish. Overall, spot alumina transaction prices in north China saw a notable narrowing in declines, with current transaction prices approaching the theoretical marginal cost of alumina production in the region. In south China, spot alumina prices accelerated their decline, and the price difference between north and south China narrowed during the week. In the short term, no large-scale production cuts are expected for alumina, and the spot alumina market is anticipated to remain relatively well-supplied, with prices likely to continue their downward trend in the short term. Alumina profit margins are narrowing, and cost support is gradually emerging. Continuous attention is needed on bauxite transaction prices and changes in alumina capacity.
