Alumina Market Faces Downward Pressure Amid Bauxite Price Discrepancies

SMM April 13 News:

Alumina prices have been on a steady decline since December 2024. Although bauxite, a major cost component, has also exhibited a downward trend, its decrease has been less significant than anticipated. According to SMM's daily cost-profit model, the alumina industry has transitioned from an average profit of over 2,400 yuan/mt to an average loss of 241 yuan/mt.

As of April 11th, alumina prices have cumulatively decreased by 2,899 yuan/mt from their peak. In contrast, bauxite prices fell by only $27.44/mt, settling around $88.75/mt. Various factors such as ore consumption, exchange rates, and VAT imply that a $1/mt reduction in bauxite prices lowers alumina costs by approximately 21-23 yuan/mt. Consequently, the modest decline in bauxite prices has reduced alumina costs by about 576-631 yuan/mt, a figure that pales in comparison to the significant reduction in alumina prices.

Regional Cost Analysis for March

An analysis of the ore structure and cost levels for alumina production reveals notable regional differences:

• Guangxi: The weighted average full cost of alumina was approximately 3,046 yuan/mt, with a cash cost of 2,829 yuan/mt. This represents a 249 yuan/mt reduction from the March average alumina price of 3,295 yuan/mt, primarily due to the lower cost of domestically sourced bauxite.
• Guizhou: Here, the weighted average full cost was around 3,137 yuan/mt, with a cash cost of 2,888 yuan/mt. The full cost was 184 yuan/mt lower than the March average price of 3,321 yuan/mt, largely because of the limited price increase in domestic bauxite compared to imported bauxite.
• Shandong: The weighted average full cost of alumina stood at 3,306 yuan/mt, with a cash cost of 3,152 yuan/mt. This was 69 yuan/mt higher than the March average price, resulting in a loss, although the cash cost remained below the month's average alumina price.
• Shanxi and Henan: The weighted average full costs were 3,681 yuan/mt and 3,509 yuan/mt, respectively, with cash costs at 3,535 yuan/mt and 3,304 yuan/mt. Compared with average cost in Henan, the higher average cost in Shanxi is attributed to the increased use of imported bauxite. Both regions experienced costs exceeding the March average, resulting in significant loss pressure.

Outlook for April

Entering April, both domestic and imported bauxite prices have shown a varying degree of decline, leading to reduced alumina costs. However, the cost reduction due to falling bauxite prices is considerably smaller than the drop in alumina prices. This disparity is putting alumina refineries under substantial financial strain.

According to the daily cost-profit model, alumina producers using imported bauxite in regions like Shanxi, Henan, Guangxi, and Shandong, as well as those utilizing domestically sourced bauxite in Shanxi and Henan, have entered a phase of losses. Faced with mounting financial pressures, the scale of production cuts in the alumina industry is expected to expand further.