Production Cut News from Some Northern Plants Causes Limited Supply Disruption [SMM Alumina Morning Comment]

Published: Feb 17, 2025 08:40

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[SMM Morning Comment on Alumina: Reports of Production Cuts at Some Northern Refineries Have Minimal Impact on Supply for Now] Supply side, some alumina refineries in northern regions reported maintenance this week, which may slightly affect alumina supply in the short term. Weekly operating rates of alumina refineries dropped slightly by 0.33 percentage points this week. Demand side, some aluminum production capacity in Sichuan and other regions, which had been cut for technological transformation, may gradually resume production, leading to an increase in alumina demand. Cost side, due to the sharp decline in spot alumina prices, alumina refineries have significantly reduced their acceptance of high-priced bauxite. As a result, bauxite holders have lowered their offers, and imported bauxite prices have also fallen. Alumina production costs may decrease accordingly. However, the current spot transaction prices of alumina in northern regions are below the theoretical marginal production cost. Overall, large-scale alumina production cuts have not yet occurred. The spot alumina market remains relatively well-supplied, and the downward trend in spot transaction prices persists, likely continuing to decline in the short term.

SMM Morning Comment on Alumina for February 17

Futures market: Last Friday's night session saw the most-traded alumina 2505 contract open at 3,346 yuan/mt, reaching a high of 3,414 yuan/mt and a low of 3,335 yuan/mt, before closing at 3,368 yuan/mt, up 0.66%. Open interest stood at 166,000 lots, down 4,000 lots.

Industry Updates:

According to SMM statistics on February 14, domestic port alumina inventory totaled 0 mt, down by 2,300 mt from the previous week.
According to SMM statistics on February 14, bauxite inventory at nine domestic ports totaled 14.32 million mt, down by 390,000 mt from the previous week.
On February 13, 30,000 mt of alumina was traded overseas for March shipment at a transaction price of $541/mt CIF Kakinada, India. The cargo originated from Australia, Indonesia, or Vietnam.

Spot-Futures Price Spread Daily Report: According to SMM data, on February 14, the SMM alumina index showed a premium of 2 yuan/mt against the most-traded contract's latest transaction price at 11:30 a.m.

Warehouse Warrant Daily Report: On February 14, the total registered warehouse warrants for alumina increased by 9,306 mt from the previous trading day to 55,000 mt. In Shandong, the total registered warehouse warrants increased by 1,802 mt to 4,513 mt. In Henan, Guangxi, and Gansu, the total registered warehouse warrants remained unchanged at 0 mt. In Xinjiang, the total registered warehouse warrants increased by 7,404 mt to 5.04 mt.

Overseas Market: As of February 14, the FOB Western Australia alumina price was $538/mt, with an ocean freight rate of $19.7/mt. The USD/CNY exchange rate sell price was around 7.28. This price translates to an external selling price of approximately 4,669 yuan/mt at major domestic ports, which is 1,312 yuan/mt higher than domestic alumina prices. The alumina import window remains closed.

Summary: Supply side, some alumina refineries in northern China reported maintenance this week, which may slightly impact alumina supply in the short term. Weekly operating rates for alumina slightly decreased by 0.33 percentage points. Demand side, some aluminum production capacity in Sichuan and other regions undergoing technological transformation may gradually resume production, increasing demand for alumina. Cost side, due to the sharp decline in spot alumina prices, alumina refineries have significantly reduced their acceptance of high-priced bauxite, leading to lower offers from bauxite holders and a decline in imported bauxite prices. This may reduce alumina production costs. However, current spot alumina transaction prices in northern China are below the theoretical marginal production cost. Overall, large-scale alumina production cuts have not yet occurred, and the spot alumina market remains relatively ample. Spot transaction prices continue to decline and may maintain a downward trend in the short term.

[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 unrelated to SMM.]

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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