SMM Analysis And Forecast Of Impact Of The 2023-2024 Heating Season On Alumina Industry

According to SMM research, in Shandong, affected by emission reduction measures against an orange alert for heavy air pollution, some alumina refineries planned to reduce the operation of roasters by about 50% from October 14 to October 22. With forthcoming heating season, impact of emission reduction and production restrictions on alumina industry for Q4 will be closely watched.

According to SMM statistics, there are a total of 22 alumina refineries who are located within the "2+26" cities of Beijing-Tianjin-Hebei and surrounding areas plus Fenwei Plain, involving three major alumina production provinces, namely Shanxi, Henan, and Shandong. Installed alumina capacity aggregated 58.45 million mt/year, accounting for 58.5% of China's total installed annual capacity, and capacity in operation was 47.72 million mt/year, accounting for 58.3% of China's total annual capacity in operation.

(1) Shanxi Province: Installed alumina capacity of 18.6 million mt/year mainly spread over Luliang, Yuncheng and Jinzhong. At present, Shanxin province boasted two alumina refineries rated A-level performance enterprises in Xiaoyi City and Yuncheng City, and an alumina refinery rated B-level enterprise in Xinzhou City.

(2) Henan Province: Installed alumina capacity of 11.85 million mt/year, mainly concentrated in Sanmenxia, Jiaozuo, Luoyang and Zhengzhou. The current operating rate of the capacity involved was a paltry 76.1%. If it is still calculated based on the installed production lines, production halts are expected to be similar to last year. According to SMM research, no alumina refineries in Henan province entered the list of performance companies in the province's key industries with heavy pollution weather in 2022.

(3) Shandong Province: Installed alumina capacity of 28 million mt/year, mainly concentrated in Binzhou, Liaocheng and Zibo. Currently, Shandong province boasted only one alumina refinery rated A-level performance enterprises in Liaocheng City. Documents from cities had specific requirements for production cuts and halts, which mainly involved alumina roasting process, in response to different weather warnings (red, orange, yellow), and made restrictions on transportations.

Overall, current domestic alumina market firmed up. Tight ore supply kept operating rate of alumina in Shanxi and Henan low. In October, liquid caustic soda prices at alumina refineries in Shanxi and Henan hiked, putting a lid on alumina production expansion to a certain extent. Under such circumstance, alumina spot supply stayed tight. SMM predicts that alumina market in Shanxi and Henan may further tighten amid heating season fallout. For Shandong-based alumina refineries with stable operating rates, most of them completed environmental protection transformation, and many policies made requirements for roasting process. Therefore, the impact on actual output was relatively limited. Overall, production restriction policy in autumn and winter heating season will linger. And actual implementation of the policy will still need to be monitored. SMM will keep monitoring the situation.