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HONG KONG, July 21 -- China's CPI Mengdong Energy Group, the parent of smelter HMHJ Aluminum, has agreed to import 2.5 million tonnes of alumina from international trading house Trafigura Group, trading sources said on Monday.
&nbsp;&nbsp;&nbsp; The alumina will be shipped in equal amounts to the Chinese buyer over 10 years from 2010, said an industry source close to the buyer, a subsidiary of China Power Investment Corporation.
&nbsp;&nbsp;&nbsp; The alumina will be priced at less than 14 percent of the price of the three-month aluminium contract of the London Metal Exchange MAL3. The contract also set the maximum and minimum prices for alumina, the main material for production of aluminium.
&nbsp;&nbsp;&nbsp; That term price was about 10 percent lower than prices for current spot alumina to China, based on Friday's LME aluminium prices at $1,705 per tonne in London.
&nbsp;&nbsp;&nbsp; Spot alumina to China was being offered at about $265 per tonne to Chinese ports, traders said.
&nbsp;&nbsp;&nbsp; &quot;The alumina will be given to HMHJ,&quot; the source said. &quot;The imports are to secure supply of alumina for the smelter.&quot;
&nbsp;&nbsp;&nbsp; Trafigura's contract will cover 18 percent of HMHJ's alumina needs in 2010, which are about 1.4 million tonnes.
&nbsp;&nbsp;&nbsp; HMHJ's facilities in Inner Mongolia are capable of turning out 700,000 tonnes of primary aluminium in 2010 and that output will consume around 1.4 million tonnes of alumina.
&nbsp;&nbsp;&nbsp; Two tonnes of alumina are normally needed to make one tonne of primary aluminium in China, the world's top producer of the metal.
&nbsp;&nbsp;&nbsp; &quot;It is a way that the aluminium smelter locks up the material supply,&quot; Judy Zhu, commodity analyst at Standard Chartered Bank (China) Limited said.
&nbsp;&nbsp;&nbsp; A trading manager at a large aluminium smelter said CPI and Trafigura's contract was unlikely to increase supply of alumina in China given the delivery time was for 10 years.
&nbsp;&nbsp;&nbsp; China produced more than 90 percent of its alumina needs in the first half of this year at 10.62 million tonnes.
&nbsp;&nbsp;&nbsp; Aluminum Corp of China Ltd (2600.HK) (601600.SS) is the top producer of alumina in the country.
&nbsp;&nbsp;&nbsp; (Source: Reuters)
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