Guinea's Mine Rights Revocation Sparks Market Concerns, Alumina Prices Surge [SMM Aluminum Futures Brief Comment]

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SMM, May 19:

Today, the most-traded SHFE aluminum 2507 contract opened at 20,125 yuan/mt, with a high of 20,300 yuan/mt, a low of 20,080 yuan/mt, and closed at 20,110 yuan/mt, down 0.2%. Trading volume was 200,000 lots, and open interest was 201,000 lots.

SMM Commentary: Recently, the aluminum market has received support amid improvements in the domestic and overseas macro environment, but bullish and bearish factors are intertwined. On the supply side, domestic aluminum capacity is approaching its ceiling, and insufficient hydropower recovery in Yunnan has exacerbated regional supply tightness, limiting the increase in aluminum ingot output. On the cost side, a sudden notice of production suspension was issued late last Friday for mining areas in Guinea where mining licenses were revoked, sparking market concerns about bauxite raw material supply, which may push up alumina costs, though the specific impact remains to be assessed. On the demand side, it faces dual pressures from domestic seasonal weakness and trade uncertainties, making significant growth unlikely in the short term. Aluminum ingot inventory has fallen to a low level for the same period, and tight spot liquidity is supporting aluminum prices. Overall, positive macro factors provide a floor for aluminum prices, and low inventory further strengthens price resilience, but off-season pressure on the demand side limits upside room. In the short term, attention should be paid to domestic and overseas demand performance as well as bauxite supply conditions.

Today, the most-traded alumina 2509 contract opened at 2,938 yuan/mt, with a high of 3,149 yuan/mt, a low of 2,920 yuan/mt, and closed at 3,127 yuan/mt, up 6.25%. Trading volume was 2.887 million lots, and open interest was 311,000 lots.

SMM Commentary: Last week, maintenance and production cuts were concentrated among alumina refineries in south China, with operating capacity decreasing by 2.9 million mt/year on a MoM basis, further tightening spot supply. Additionally, alumina refineries have been facing losses in recent months, with strong intentions to refuse to budge on prices. Coupled with maintenance and production cuts, spot supply tightened, leading to a significant rebound in spot prices. In the futures market, due to the revocation of mining rights for some enterprises in Guinea last Friday night, some currently operating enterprises received production suspension notices, involving significant capacity, sparking market concerns about bauxite raw material supply. Futures prices surged sharply, with the most-traded contract approaching the daily limit, and the 2507 and 2508 contracts hitting the daily limit at one point. It is understood that relevant enterprises are negotiating with the Guinean government, and the specific impact remains to be assessed. In the short term, it may provide sentiment-based support for bauxite prices, thereby supporting alumina costs. Subsequent attention should be paid to changes in the operating capacity of alumina refineries, as well as bauxite shipments from Guinea and related enterprise dynamics on the raw material side.

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