Fundamentals Are Mixed; Alumina Expected to Fluctuate [SMM Morning Comment on Alumina]

Published: Feb 19, 2025 08:56

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[SMM Morning Comment on Alumina: Fundamentals Mixed, Alumina Expected to Fluctuate] Overall, supply side, some alumina refineries in northern regions reported maintenance this week, which may slightly impact alumina supply in the short term. Weekly operating rate of alumina decreased slightly by 0.33 percentage points this week. Demand side, some aluminum production cuts and technological transformation capacities in Sichuan and other regions 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. Bauxite holders also lowered their quotations, and imported bauxite prices fell, potentially reducing alumina production costs. 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, and the spot alumina market remains relatively well-supplied. Spot transaction prices are expected to fluctuate in the short term.

SMM Morning Comment on Alumina, February 19

In the overnight session, the most-traded alumina 2505 futures contract opened at 3,449 yuan/mt, reached a high of 3,449 yuan/mt and a low of 3,408 yuan/mt, and finally closed at 3,420 yuan/mt, down 0.87%. Open interest stood at 158,000 lots, an increase of 1,424 lots. Regarding spot alumina prices, on February 18, SMM alumina was quoted at 3,329 yuan/mt, down 2 yuan/mt from the previous trading day.

Ore Market: As of February 18, the SMM Imported Bauxite Index was reported at $98.23/mt, flat compared to the previous trading day. The SMM Guinea Bauxite CIF average price was $97/mt, also unchanged from the previous trading day.

Industry Updates:

1. On February 18, transactions of 84,000 mt of alumina were recorded in Shandong at a transaction price of 3,340-3,350 yuan/mt. In Henan, 3,000 mt of spot alumina were transacted at a price of 3,400 yuan/mt.

2. According to SMM, starting February 19, a major alumina refinery in Shandong adjusted its purchase price for 32% ionic membrane liquid caustic soda, reducing it by 20 yuan/mt from 930 yuan/mt to 910 yuan/mt on an ex-factory two-invoice basis (equivalent to approximately 2,844 yuan/mt on a 100% basis).

Spot-Futures Price Spread Daily Report: According to SMM data, on February 18, the SMM Alumina Index showed a discount of 91 yuan/mt against the most-traded contract's latest transaction price at 11:30.

Warehouse Warrant Daily Report: On February 18, the total registered warehouse warrants for alumina remained unchanged from the previous trading day at 95,500 mt. In Shandong, the total registered warehouse warrants for alumina were unchanged at 4,513 mt. In Henan, the total registered warehouse warrants were unchanged at 18,000 mt. In Guangxi and Gansu, the total registered warehouse warrants remained at 0 mt. In Xinjiang, the total registered warehouse warrants were unchanged at 7.3 mt.

Overseas Market: As of February 18, the FOB Western Australia alumina price was $520/mt, with an ocean freight rate of $19.70/mt. The USD/CNY exchange rate sell price was around 7.30. This price translates to an external selling price of approximately 4,532 yuan/mt at major domestic ports, which is 1,203 yuan/mt higher than domestic alumina prices. The alumina import window remains closed.

Summary: Overall, on the 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. On the demand side, some aluminum production capacities in Sichuan and other regions, which were previously undergoing technological transformation, have gradually resumed production, increasing demand for alumina. On the 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 quotations from bauxite holders. Imported bauxite prices have also declined, potentially reducing alumina production costs. However, current spot transaction prices for alumina in northern China are below the theoretical marginal production cost. Overall, large-scale production cuts in alumina have not yet occurred, and the spot alumina market remains relatively ample in supply. Spot transaction prices are expected to fluctuate 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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