Spot Alumina Prices Resume Downward Trend as Operating Capacity Declines, but Loose Fundamentals Remain Unchanged [SMM Analysis]

SMM March 13 News:

After a brief stabilization, domestic spot alumina prices resumed a downward trend. From last Thursday to Friday, sporadic transactions were observed in the spot alumina market, with transaction prices in north China generally ranging from 3,200-3,300 yuan/mt. The decline in spot alumina prices has resumed.

The drop in spot alumina prices has narrowed the industry's average profit margin to around 100 yuan/mt, with some alumina refineries facing losses. Under high cost pressure, some alumina refineries in north China have implemented production cuts. According to SMM data, as of this Thursday, the total installed capacity of metallurgical-grade alumina in China was 105.02 million mt/year, unchanged WoW, while the operating capacity was 88.26 million mt/year, down 860,000 mt WoW. The national weekly operating rate of alumina decreased by 0.8 percentage points WoW to 84.04%.

Although the operating rate of alumina has declined, the fundamentally loose supply and demand structure of alumina remains unchanged. According to SMM data, as of this Thursday, the operating capacity of domestic aluminum was approximately 43.78 million mt/year. Based on an alumina consumption ratio of 1.925, the balanced demand for alumina corresponds to an annualized operating capacity of about 84.28 million mt/year, which is significantly lower than the current weekly operating capacity of alumina.

In terms of imports and exports, both the domestic alumina import and export windows remained closed. Overseas alumina supply cannot exacerbate the domestic alumina surplus but also fails to provide additional demand. As of this Thursday, SMM's FOB price for Western Australian alumina was reported at $425/mt, down $47/mt WoW. The domestic alumina import loss narrowed from $750/mt to $413/mt. Meanwhile, the domestic alumina export window has completely closed. Based on the recent spot transaction price of alumina in Shandong at 4,260 yuan/mt, considering freight, port charges, and other costs, the domestic alumina export cost is approximately $470/mt, which is $45/mt higher than the latest FOB transaction price of Western Australian alumina. Consequently, domestic alumina export volumes may decrease in the future.

Overall, the fundamentally loose supply and demand structure of alumina has not been reversed, and spot alumina prices are likely to fluctuate downward in the short term.

(The above information is based on market data and comprehensive evaluations by the SMM research team. The information provided herein is for reference only and does not constitute direct investment research advice. Clients should make decisions cautiously and not substitute this information for independent judgment. Any decisions made by clients are unrelated to SMM.)

Data Source: SMM Click on the SMM Industry Database for more information

(Mingxin Guo 021-51595800)