SHANGHAI, Feb 9 (SMM) - Alumina prices fluctuated again post the Chinese New Year (CNY) holiday due to the slight increase in prices in Guizhou and Binzhou regions after experiencing a short period of stability around the holiday.
Previously, the prices of alumina in Guizhou rose slightly, mainly because Chongqing Bosai Wanzhou Alumina Refinery purchased a small amount of alumina from Guizhou to deliver its long-term orders due to limited roasting capacity. Recently, Binzhou City issued a notice of emergency response to heavy air pollution, which restricted the roasting production of local alumina refineries. The expectation of reduced production caused a slight increase in the prices of alumina in Binzhou.
Looking back at the alumina market in the past six months, it can be seen that after a wave of dips and hitting the annual low in late November, alumina price has entered the upward channel again. As of February 8, the SMM alumina spot price was 2,950 yuan/mt. Compared with 2,764 yuan/mt on November 21, the price has climbed 186 yuan/mt, an increase of 6.73%.
Looking back at the overall market before the CNY holiday from December to January, the alumina prices were driven by the restocking demand ahead of CNY holiday, and the overseas and domestic production cuts.
In early January 2022, Alcoa said it will cut the production at its Kwinana alumina refinery in Western Australia by about 30% due to a shortage of natural gas supplies. In addition, the Australian government announced a 12-month price cap on natural gas and coal in December 2022 to curb rising energy prices, but gas producers said this could put supply at risk.
The reduction in production has pushed up the price of overseas alumina. At the same time, because the finished alumina products are mainly exported to the Middle East, India, China, and Southeast Asia, the rise in overseas alumina prices has closed China’s import window, and the demand for domestic alumina has been boosted, which indirectly affected the domestic alumina prices. In China, in mid-January, due to the continuous shortage of natural gas supply in Shanxi, Chongqing, and Hebei, the roasters of some alumina refineries could not maintain operation, resulting in a decrease in alumina supply and a rebound in alumina prices.
At present, SMM believes that the prices of alumina may remain stable in the short term, and there will be no major fluctuations for the time being.
First of all, on the supply side, new capacity and suspended capacity has been put into production one after another. In February, some alumina refineries in Guizhou and Shanxi have plans to resume the production. At the end of January, the third production line of Hebei Wenfeng was successfully put into operation. The alumina capacity of this line is 1.2 million m per year. An alumina refinery in Guizhou also officially resumed in early February with power supply returning to normal. So the supply is picking up steadily. It is expected that the daily output of alumina in February will increase to 210,000 mt, and the total domestic output of metallurgical grade alumina in February (28 days) will be 5.83 million mt.
However, on the demand side, recently, there have been rumours that Yunnan will reduce the production due to power shortages. According to SMM research, some aluminium smelters said that aluminium smelters in Yunnan Province may face another power cut and production reduction in the short term, but there are still no clear documents and other substantive production reduction measures. According to SMM data, the current total operating aluminium capacity in Yunnan is around 4.04 million mt. If the power rationing is officially launched, the demand of alumina will weaken. The follow-up progress is worth attention.
Generally speaking, the operating alumina capacity is rising, but downstream aluminium production is expected to be curtailed to some extent. Under the premise that there is an expectation of excess supply, the downstream players will be increasingly wait-and-see, and it is expected that alumina prices will be stable in the short term.
