Some mining rights in Guinea have been placed in strategic reserve areas. Driven by the news, futures rose again [SMM Alumina Morning Comment]

SMM Alumina Morning Comment on May 22

Futures Market: Overnight, the most-traded alumina 2509 futures contract opened at 3,230 yuan/mt, with a high of 3,271 yuan/mt, a low of 3,224 yuan/mt, and closed at 3,243 yuan/mt, up 27 yuan/mt or 0.83%, with an open interest of 385,000 lots.

Spot Alumina: On Wednesday, inquiries revealed that 3,000 mt of alumina were traded in Guangxi at a transaction price of 3,200 yuan/mt.

Ore: As of May 21, the SMM Import Bauxite Index was reported at $71.20/mt, up $0.36/mt from the previous trading day. This was mainly due to disruptions in Guinea's bauxite supply, with some market offers rising significantly from the previous period, driving a rebound in the SMM Import Bauxite Index. The SMM Guinea Bauxite CIF average price was reported at $70/mt, unchanged from the previous trading day. The SMM Australia Low-Temperature Bauxite CIF average price was also reported at $70/mt, unchanged from the previous trading day. The SMM Australia High-Temperature Bauxite CIF average price was reported at $65/mt, unchanged from the previous trading day.

Industry News:

1. A Major Alumina Refinery in Shandong Raises Liquid Caustic Soda Purchase Price: According to SMM, starting from May 21, a major alumina refinery in Shandong adjusted the purchase price of 32% ionic membrane liquid caustic soda, raising it by 20 yuan/mt from the previous 780 yuan/mt. The ex-factory price under the two-invoice system was set at 800 yuan/mt (approximately 2,500 yuan/mt converted to 100% concentration).
2. According to foreign media reports, in an order read on Guinea's national television on the evening of Tuesday, May 20, 2025, the transitional authorities decided to classify several mining rights as strategic reserve areas, including concessions, industrial and semi-industrial mining licenses, as well as exploration licenses for bauxite, iron, gold, diamonds, and graphite. "In accordance with the provisions of Decree No. D/2025-065/PRG-CNRD-SGG dated May 9, 2025, Decree No. D/2025-066/PRG-CNRD-SGG dated May 9, 2025, and Article 2 of Decree No. D/2025-067/PRG-CNRD-SGG dated May 14, 2025, the industrial and semi-industrial mining concessions and licenses for bauxite, iron, gold, diamonds, and graphite are revoked. In accordance with Article 5 of the Mining Law, the relevant concessions and licenses are now placed in strategic reserve areas," the decree stated. It further noted that the exploration licenses for bauxite, iron, gold, diamonds, base metals, precious stones, black sand, and manganese, which were revoked by Order A/2025-480/MMG-SGG dated May 16, 2025, are also classified as strategic reserve areas in accordance with Article 5 of the Mining Law.

Spot-Futures Price Spread Report: According to SMM data, on May 21, the SMM Alumina Index was at a discount of 147.58 yuan/mt to the latest transaction price of the most-traded contract at 11:30 a.m.

Warrant Daily Report: On May 21, the total registered volume of alumina warrants decreased by 16,826 mt from the previous trading day to 173,500 mt. In Shandong, the total registered volume of alumina warrants remained unchanged from the previous trading day at 601 mt. In Henan, it also remained unchanged at 3,001 mt. In Guangxi, the total registered volume of alumina warrants decreased by 900 mt from the previous trading day to 93.06 million mt. In Gansu, it remained unchanged at 6,306 mt. In Xinjiang, the total registered volume of alumina warrants decreased by 15,926 mt from the previous trading day to 154,300 mt.

Overseas Market: As of May 21, 2025, the FOB Western Australia alumina price was $370/mt, with an ocean freight rate of $21.50/mt. The selling price of the USD/CNY exchange rate hovered around 7.22. This price translates to approximately 3,275 yuan/mt at major domestic ports, which is 198 yuan/mt higher than the domestic alumina price. The alumina import window remained closed.

Summary: Last week, maintenance and production cuts were concentrated among alumina enterprises in south China, leading to a 2.9 million mt/year decrease in operating capacity on a QoQ basis, further tightening spot supply. Additionally, alumina enterprises have been facing continuous losses in recent months, with a strong intention to refuse to budge on prices. Coupled with maintenance and production cuts, the tightening of spot supply has led to a continuous rebound in spot transaction prices. Last Friday, due to the revocation of mining rights for some enterprises in Guinea, some currently operating enterprises received notices of suspension. This week, some miners declared force majeure to shipping companies. On Tuesday evening, in the order read by the Guinean authorities, the revoked mining rights were placed in strategic reserve areas. The specific impact of this incident on Guinea's bauxite supply remains to be assessed. In the short term, it may provide sentiment-based support for bauxite prices, thereby offering cost support for alumina. Subsequent attention should be paid to changes in the operating capacity of alumina refineries, as well as the shipment volume of Guinea's bauxite from the raw material side and the dynamics of related enterprises.

[The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make prudent decisions and should not rely on this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.]