Operating capacity of alumina rebounded MoM in June. Spot alumina prices may fluctuate in the short term. [SMM Alumina Morning Comment]

SMM Alumina Morning Comment on July 1

Futures Market: The overnight session of the most-traded alumina 2509 futures contract opened at 2,976 yuan/mt, with a high of 2,981 yuan/mt, a low of 2,941 yuan/mt, and closed at 2,944 yuan/mt, down 42 yuan/mt or 1.40%, with an open interest of 296,000 lots.

Bauxite: As of June 27, the SMM imported bauxite index stood at $74.21/mt, unchanged from the previous trading day; the SMM Guinea bauxite CIF average price was $74/mt, unchanged from the previous trading day; the SMM Australia low-temperature bauxite CIF average price was $70/mt, unchanged from the previous trading day; and the SMM Australia high-temperature bauxite CIF average price was $61/mt, unchanged from the previous trading day.

Industry News:

1. According to SMM data, China's metallurgical-grade alumina production in June 2025 (30 days) decreased by 0.19% MoM and increased by 6.1% YoY. As of the end of June, China's existing capacity for metallurgical-grade alumina was around 110.82 million mt, with the actual operating capacity increasing by 3.14% MoM and the operating rate reaching 79.7%.
2. According to SMM statistics, domestic aluminum production in June 2025 (30 days) increased by 1.57% YoY and decreased by 3.23% MoM. In June, the operating capacity of domestic aluminum smelters saw a slight MoM fluctuation. SMM learned that the second-phase replacement of electrolytic aluminum plants in Shandong and Yunnan provinces began at month-end, requiring the original plants to reduce production and pass acceptance inspections before restarting pots at the new plants. In June, the proportion of liquid aluminum in domestic aluminum smelters continued to rise, with the industry's liquid aluminum proportion increasing by 0.1 percentage points MoM to 75.8%, a smaller increase than initially expected at the beginning of the month. This was mainly due to the high inventory of downstream alloy products, leading to an increase in casting ingots at some aluminum plants. It is expected that the proportion of liquid aluminum will show a pullback trend in July. Based on SMM's liquid aluminum proportion data, domestic aluminum casting ingot production in June decreased by 12.77% YoY to around 872,500 mt.
3. The first alumina refinery to be built in the US in decades will be constructed in Oklahoma. California-based Brimstone Company, in partnership with Dolese Bros. of Oklahoma City, is investing approximately $400 million to build a demonstration alumina refinery near Lawton or Duncan in the southwestern part of the state. The refinery, covering about 20 acres, is designed to produce 80,000 mt of green cement and 20,000 mt of smelting-grade alumina annually. It will extract alumina and produce cement directly from common silicate rocks rich in alumina and calcium from the local Roosevelt quarry using Brimstone's patented Rock Refinery™ process, replacing traditional imported bauxite and the high-carbon-consuming Bayer process. The project is expected to be fully operational before 2030 and will create hundreds of local jobs during the construction and operation periods. Currently, Brimstone is appealing the suspension of its $189 million clean energy demonstration grant from the US Department of Energy (DOE) in 2024 and is collaborating with congressional representatives to restore the funding. The company stated that federal subsidies merely served as a "catalyst" accelerating project progress, and even without such funding, the demonstration plant would still proceed in Oklahoma.

Basis Report: According to SMM data, the SMM Alumina Index showed a premium of RMB 129.37/mt against the latest transaction price of the most-traded contract at 11:30 on June 30.

Warrant Report: On June 30, total registered alumina warrants remained unchanged from the previous trading day at 30,300 mt. Regional breakdowns showed: Shandong at 0 mt (unchanged), Henan at 0 mt (unchanged), Guangxi at 2,701 mt (unchanged), Gansu at 0 mt (unchanged), and Xinjiang at 27,600 mt (unchanged).

Overseas Market: As of June 30, 2025, FOB Western Australia alumina price stood at $370/mt with ocean freight at $21.9/mt. The USD/CNY selling rate hovered around 7.19, translating to an equivalent domestic mainstream port selling price of approximately RMB 3,260/mt. This represents a RMB 145/mt premium over domestic alumina prices, keeping the alumina import window closed.

Summary: In the near term, alumina operating capacity is expected to remain high while spot market supply stays relatively loose, exerting downward pressure on spot alumina prices. However, rising futures prices have generated some warrant transfer demand, signaling a potential stabilization of spot prices. Cost-wise, Q3 bauxite long-term contract prices are anticipated to stabilize or decline, leading to a marginal reduction in overall alumina production costs. As alumina prices continue to fall, cost support effects are expected to gradually emerge. Spot alumina prices are likely to consolidate within a range in the short term.

[The provided information is for reference only. This article does not constitute direct investment research or decision-making advice. Clients should exercise caution, avoid relying solely on this analysis, and understand that any decisions made are independent of SMM's positions.]