Alumina Prices in South China Were more Resilient to Declines than in the North, but Will Face Pressure from Oversupply in the Long Run

SHANGHAI, May 30 (SMM) - As of last Friday, the SMM weighted alumina index stood at 2,995 yuan/mt, down 13 yuan/mt from a week ago. The prices fell further in Shanxi and Henan, but remained stable in south-west China. The prices stood between 2,950-3,060 yuan/mt in Shandong, 3,000-3,120 yuan/mt in Henan, 2,890-2,950 yuan/mt in Shanxi, 2,960-3,040 yuan/mt in Guangxi, 3,000-3,050 yuan/mt in Guizhou, and 3,100-3,150 yuan/mt in Bayuquan.

After the Australian government imposed a ban on the export of alumina to Russia on March 20, the balance of global alumina market was disrupted as the spot alumina that was originally destined for Russia began to flow into the overseas market, which continuously sent the market prices lower. A deal for 30,000 mt of alumina was done at $356/mt FOB Australia last Monday, down $4/mt from the previous transaction, for shipment in July. This price was equivalent to 3,262.7 yuan/mt CIF China and 268.3 yuan/mt higher than the domestic spot prices. The ocean freight was $62/mt. The import window remained closed.

Alumina prices in Shanxi and Henan dropped by 25 yuan/mt and 10 yuan/mt respectively. The logistics in Shanxi has recovered, and some alumina refineries reported up to 100,000 mt of alumina. With a significant increase in the amount of alumina available in the spot market, transaction prices went down. Previously, due to the outbreak of COVID-19 in Shanxi, alumina in Henan became popular and local prices rose. However, aluminium smelters and traders sourced less alumina from Henan after the pandemic situation in Shanxi has improved, causing alumina prices in Henan to fall back. Bauxite supply in Guizhou remained tight, forcing a few local alumina refineries to reduce their production since April. Those refineries have purchased Australian bauxite, but are unable to resume their production until the Australian bauxite arrives.  Alumina in Guangxi was still supplied primarily under long-term contracts. With the resumption of production of aluminium smelters in Yunnan, the demand for alumina in Guangxi increased, with few cargoes flowing into the spot market.

Wait-and-see sentiment dominated the alumina market in north China amid falling market prices. The alumina market in south-west China was in a tight balance, allowing the prices in Guizhou and Guangxi to be resilient to decline. In the long run, the supply surplus caused by the release of new capacity will continue to put pressure on market prices. SMM will keep a close eye on whether the high-cost alumina refineries in Shanxi and Henan will be forced to reduce their production due to losses.