Alumina Prices to Stay at a High Level in the Short Term

SHANGHAI, May 16 (SMM) - As of last Friday, the SMM weighted alumina index stood at 3,016 yuan/mt, flat from a week ago. The prices stood between 2,950-3,060 yuan/mt in Shandong, 3,020-3130 yuan/mt in Henan, 2,950-2,980 yuan/mt in Shanxi, 2,960-3,040 yuan/mt in Guangxi, 3,000-3,050 yuan/mt in Guizhou, and 3,150-3,200 yuan/mt in Bayuquan.

Alumina prices FOB Western Australia fell further to $365/mt as of last Friday, which was equivalent to 3,341 yuan/mt CIF China and 325 yuan/mt higher than the domestic spot prices. The ocean freight stood at around $60/mt. The price gap between domestic and overseas markets has narrowed to reasonable levels, and the import window showed signs of opening.  However, the import volume in April is not expected to increase significantly and may remain at around 180,000 mt. With the overseas alumina prices in a downward trajectory, the market is gradually taking a wait-and-see attitude. Port operations have slowed down amid sporadic outbreak of COVID-19 across China, including some ports, turning buyers more cautious about importing.

The pandemic situation in north China has improved, with Shandong, Shanxi and other regions gradually lifting their lockdowns. Alumina refineries in some areas still shipped their cargoes by railway due to pandemic control measures, while truck transportation in other regions has gradually recovered. The regional supply-demand imbalance caused by the pandemic has improved significantly. The resumption of production of aluminium smelters in Yunnan offered strong support to local alumina prices.

SMM believes that alumina prices will stay at a high level in the short term as market prices lack guidance in the absence of large-scale transactions.  However, in the long run, alumina prices will face downside risks as the release of new capacity from Hebei Wenfeng, Bosai Wanzhou and Tiangui will shift the market to oversupply.