Review of Alumina Market in July-August: Prices of Alumina Varied between North and South China

SHANGHAI, Aug 11 (SMM) - At present, prices of alumina varied in different provinces as well as between the northern and southern markets, and so does the mentality of buyers, sellers and traders. SMM review of the recent alumina market following a chronological order is demonstrated as follows.

In mid-July, the production of alumina in north China was reduced under the pressure of high costs, promoting the prices to rebound slightly.

Some enterprises in north China were forced to cut the production (to an annualised capacity of about 3.3 million mt) because they could not afford high-priced imported ore and were unable to purchase sufficient domestic ore as well. Therefore, the supply of alumina in the northern spot market was tight. Alumina prices in Shanxi and Henan both rose slightly, but the increase was very limited mainly due to the sharp drop of aluminium prices, which hovered at around 17,200 yuan/mt, down nearly 1,600 yuan/mt compared with the beginning of July. Therefore, alumina smelters began to bargain down the purchasing prices due to the slump of profits. However, as the losses of alumina refineries in north China gradually expanded, it was difficult for them to compromise on the prices. Consequently, the disagreement between buyers and sellers on the prices began to mount. Given the uncertainty over price outlook, traders also stood wait-and-see, and their willingness to purchase and restock was extremely low. In south-west China, with the new production capacity in Guangxi and Chongqing released, the alumina prices inched higher.

In late July, the market transactions were sluggish, and the prices basically stabilised.

The market gradually accepted the reduced production in the northern region, and the overall market enthusiasm declined. In north China, the smelters were sluggish in producing amid shrinking profits and growing losses caused by high costs. As most smelters mainly maintained basic production to deliver long-term orders, the supply in the spot market was small. Moreover, the smelters were reluctant to sell, quoting at 2,950-3,050 yuan/mt, and the transaction prices basically ranged between 2,900-3,000 yuan/mt. Spot transactions in south-west China were poor, and the prices remained stable.

From the end of July to the beginning of August, the news of growing output cuts pushed up the prices, but the actual production cuts fell short of the expectations, leading to falling prices again.

There were rumours that a smelter in north China was expected to reduce or suspend the production due to environmental protection procedures (involving a production capacity of 3 million mt), which led to an increase in inquiries in the northern market. However, as of August 11, no production suspension was heard from the smelter, so the relatively stable supply alleviated the market panic. The transactions gradually returned to a normal level, and the downstream buyers hardly accepted of high alumina prices. In southwest China, with ample supply in the spot market and higher profits than those in northern China, the smelters were less willing to hold prices firm, so there was a certain room for price negotiation.

On the whole, the supply of alumina in north China was sufficient, the buyers were willing to stock up, and the purchase prices were  lowered. However, due to high costs, the sellers were firm to hold the price. It is expected that the prices of alumina in north China will continue to fluctuate. In south-west China, the new production capacity continues to ramp up, contributing to the steady increase of the supply in the region. The supply of alumina in the spot market available for sale is also increasing, but there is also possibilities that deals may be made at low prices in the future. It is expected that in August the prices of alumina will continue to stabilise in north China but fall slightly in south China.