The window for arbitrage between futures and spot remains open. Spot alumina prices may hold up well in the short term. [SMM Morning Comment on Alumina]

SMM Alumina Morning Comment on July 14

Futures Market: The overnight session of the most-traded alumina 2509 futures contract opened at 3,088 yuan/mt, with a high of 3,138 yuan/mt, a low of 3,088 yuan/mt, and closed at 3,137 yuan/mt, down 10 yuan/mt or 0.32%, with an open interest of 254,000 lots.

Ore: As of July 14, the SMM imported bauxite index stood at $73.72/mt, down $0.60/mt from the previous trading day, mainly due to difficulties in closing deals for Guinea bauxite at around $75/mt in recent inquiries, leading to a decrease in the average price. The SMM Guinea bauxite CIF average price was reported at $73.5/mt, down $0.50/mt from the previous trading day. The SMM Australia low-temperature bauxite CIF average price was reported at $70/mt, unchanged from the previous trading day. The SMM Australia high-temperature bauxite CIF average price was reported at $61/mt, unchanged from the previous trading day.

Industry News:

1. Bauxite Port Inventory: According to SMM statistics on July 11, the total bauxite inventory at 9 domestic ports was 22.12 million mt, a decrease of 450,000 mt from the previous week.
2. According to overseas media reports, Indonesia's Inalum recently announced plans to expand the capacity of its aluminum smelter. Currently, Inalum's aluminum smelter has a capacity of 300,000 mt/year, which will be increased to 900,000 mt/year after the second-phase expansion. The company is studying the possibility of further increasing it to 1 million-1.05 million mt/year, depending on the local power supply situation.
3. Weiqiao Pioneering: Yunnan Honghe New Material Co., Ltd. successfully commenced production. The world's first large-scale application of the NEUI600+ super pot production line, which was put into operation this time, fully adopts Weiqiao's proprietary 600kA Plus super-large aluminum electrolytic pots.
4. Vedanta Limited, an Indian metals giant, reported strong operational performance in the first quarter ending June 30, 2025, particularly highlighting its outstanding performance in the aluminum value chain. 1. Alumina production increased significantly by 9%. 2. Power production increased by 11%. The highlight of this quarter was that the alumina production at its Lanjigarh refinery reached a record high of 587,000 mt. This marked a 9% increase YoY and a substantial 36% increase compared to the previous quarter. The growth in alumina production was mainly due to Vedanta's expansion of refining capacity at its Lanjigarh plant in Odisha. The company recently increased the plant's annual capacity from 2 million mt to 3.5 million mt. The capacity upgrade, combined with improved raw material supply and operational efficiency, enabled the company to achieve its highest-ever quarterly alumina production. The increase in alumina production directly supported Vedanta's total aluminum production, which reached 605,000 mt, up 1% YoY.
5. Phase II Project of Zhongrun's 500,000 mt/year Aluminum Smelter: Aiming to Start Construction Within the Year! The Phase II project of Chalco's China Resources Power is a core project in Xing County, Lvliang City, Shanxi Province, aimed at building a "10 million mt/year aluminum-magnesium industrial cluster worth 100 billion yuan." It plans to add 500,000 mt/year of aluminum smelting capacity, merging with Phase I to form a total annual capacity of 1 million mt. The project is invested in and constructed by Shanxi Chalco China Resources Power Co., Ltd. (40% owned by Chalco, and 20% each by China Resources Power, Xishan Coal and Electricity, and Jinneng Electric Power). It adopts internationally advanced electrolysis technology and plans to build supporting 3×660MW captive power plants, aiming to achieve integrated "coal-electricity-aluminum" operations. As of July 2025, site leveling for the project has been completed, but construction has not yet started due to issues with the replacement of aluminum smelting capacity indicators. The project relies on the 1.6 billion mt of bauxite resources already allocated in Lvliang and the advantages of the regional power grid. Upon completion, it will synergize with the upstream 1.8 million mt/year alumina capacity of Huaxing Alumina and drive downstream aluminum processing enterprises, building an "uninterrupted liquid aluminum" industry chain. The Lvliang Municipal Government's special working group is coordinating capacity replacement (requiring the integration of 460,000 mt of idle indicators within the province) and approval matters, aiming to start construction within 2025. After reaching full production, it is expected to generate an annual output value exceeding 7 billion yuan and create over a thousand jobs.

Basis Daily Report: According to SMM data, on July 11, the SMM alumina index had a premium of 9.61 yuan/mt against the latest transaction price of the most-traded contract at 11:30 a.m.

Warrant Daily Report: On July 11, the total registered volume of alumina warrants remained unchanged from the previous trading day at 18,600 mt. In Shandong, the total registered volume of alumina warrants remained unchanged at 0. In Henan, the total registered volume of alumina warrants remained unchanged at 0. In Guangxi, the total registered volume of alumina warrants remained unchanged at 1,200 mt. In Gansu, the total registered volume of alumina warrants remained unchanged at 0. In Xinjiang, the total registered volume of alumina warrants remained unchanged at 17,400 mt.

Overseas Market: As of July 11, 2025, the FOB Western Australia alumina price was $366/mt, with an ocean freight rate of $22.15/mt. The USD/CNY selling rate was around 7.19. This price translates to an external selling price of approximately 3,233 yuan/mt at major domestic ports, which is 90 yuan/mt higher than the domestic alumina price. The alumina import window remains closed.

Summary: From the perspective of the demand for raw materials in aluminum smelting production, the supply of alumina is relatively loose. The operating capacity of alumina is nearly 88.5 million mt/year, while the combined demand for aluminum smelting production and net exports has an annualized operating capacity of approximately 86 million mt. According to SMM, the weekly inventory of alumina at aluminum smelters increased by approximately 22,000 mt MoM last week. However, after alumina futures rose, futures-to-spot arbitrage was triggered, increasing demand from futures-to-spot traders for delivery brand alumina and prompting active inquiries. Spot alumina supplies tightened as suppliers refused to budge on prices. Under such circumstances, some high premium transactions emerged, driving a rebound in spot prices. In the short term, spot alumina prices are expected to hold up well, with subsequent trends requiring continuous monitoring of total registered SHFE warrants and changes in alumina operating capacity.

[All data except public information are processed by SMM based on public information, market exchanges, and SMM's internal database models, serving as reference only and not constituting investment advice.]