Increased Low-Priced Transactions Domestically and Internationally, Alumina Prices Are Expected to Decline in the Short Term [SMM Alumina Morning Comment]

SMM Morning Comment on Alumina for January 17

Futures Market: During the night session, the most-traded alumina 2502 contract opened at 3,694 yuan/mt, reached a high of 3,735 yuan/mt, a low of 3,640 yuan/mt, and closed at 3,658 yuan/mt, down 36 yuan/mt or 0.97%. Open interest stood at 97,600 lots, an increase of 3,305 lots.

Industry Dynamics:

1. US-based industrial innovation company Brimstone announced a significant plan to produce smelting-grade alumina using the country's abundant carbon-free calcium silicate rocks through its innovative process, aiming to eliminate reliance on imported bauxite. This facility could become the first new domestic source of smelting-grade alumina in the US in decades.
2. Overseas Alumina Transactions: On January 15, 25,000 mt of alumina was transacted overseas at a price of $581/mt Go Dau, Vietnam, for March shipment.
3. According to SMM data, as of this Thursday, the national weekly operating rate of alumina increased by 0.49 percentage points WoW to 87.25%. Among them, the weekly operating rate in Shandong remained flat WoW at 92.11%; in Shanxi, it increased by 2 percentage points WoW to 81.40%; in Henan, it remained flat WoW at 70.00%; and in Guangxi, it remained flat WoW at 93.94%.
4. Spot Alumina Transactions: In Henan, 8,000 mt of spot alumina was transacted at a price of 4,050 yuan/mt with a one-month payment term.

Spot-Futures Price Spread Daily Report: According to SMM data, on January 16, the SMM alumina index showed a premium of 988 yuan/mt against the most-traded contract's latest transaction price at 11:30.

Warehouse Warrant Daily Report: On January 15, the total registered warehouse warrants for alumina increased by 299 mt from the previous trading day to 43,200 mt. In Shandong, the total registered warehouse warrants remained flat at 901 mt; in Henan, they remained flat at 12,000 mt; in Guangxi, they remained flat at 0 mt; in Gansu, they remained flat at 0 mt; and in Xinjiang, they increased by 299 mt to 30,300 mt.

Overseas Market: As of January 16, the FOB Western Australia alumina price was $610/mt, with an ocean freight rate of $20.9/mt. The USD/CNY exchange rate selling price was around 7.35. This price translates to an external selling price of approximately 5,321 yuan/mt at major domestic ports, which is 622 yuan/mt higher than domestic alumina prices. The alumina import window remains closed.

Summary: Recently, the weekly operating rate of alumina has continued to increase slightly, while there has been no significant change on the demand side. Low-priced spot transactions have been frequent in the market, with a larger decline compared to earlier periods. In Henan, the spot transaction price on Thursday was 4,050 yuan/mt, down 830 yuan/mt from last Thursday's price of 4,880 yuan/mt. However, as of now, alumina capacity has not entered a large-scale loss-making state. Alumina supply is expected to maintain a high operating rate in the short term, with the supply-demand fundamentals remaining in a slightly surplus state. Overall, spot alumina prices are expected to continue their downward trend in the short term. Close attention should be paid to bauxite transaction prices, alumina costs, and overseas spot alumina prices in the near term.

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