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The shortage of alumina in China will exacerbate the shortage of alumina in winter
Oct 25, 2017

The shortage of alumina in China will exacerbate the shortage of alumina in winter

Wood Mackenzie, a senior analyst at Ami Shivka, said that in the coming winter, the main concern of alumina buyers is the reduction of aluminum smelters, rather than the closure of alumina refineries and bauxite.

As China shut down its capacity to harness the environment, the shortage of alumina will increase in the next few months, forcing refiners to compete for supplies, thereby pushing up alumina prices.

Since May, alumina prices have soared 73%, and possibly higher prices may fall; but at the beginning of next year, because after the winter China refinery capacity closures will once again resume production, at the same time, some new capacity will be put into operation.

The alumina market suffered a perfect storm. "Before the shutdown of winter capacity, market sentiment is rising rapidly," said Anthony Everiss, senior consultant at the CRU.

In order to reduce pollution emissions, China has implemented the most stringent winter emission reduction measures in the history of heavy industries, including aluminum refineries and alumina processing plants.

Wood Mackenzie, a senior analyst at Ami Shivka, said that in the coming winter, the main concern of alumina buyers is the reduction of aluminum smelters, rather than the closure of alumina refineries and bauxite.

She said that some smelters believed that the reduction in aluminium production would cause excess alumina and depress prices, so they were reluctant to buy.

But the unexpected sudden closure of bauxite caused a Domino effect on the supply chain.

"Smelters are digesting inventories, but bauxite inspections have completely caught them off guard," Shivka said.

Extra shutdown?

As the refinery bauxite is about to run out, Henan is planning to cut alumina production two months ahead of schedule.

China's bauxite imports increased by 46% in August, while alumina imports surged by 123%, reflecting the shortage.

According to Metal Bulletin's Australian offshore price index, the price of alumina rose by 53% in the past two months to $469.74 per ton, the highest level since the index was launched in August 2010.

"I think it's going to go a little higher," Shivkar said. "All refineries in China don't have enough bauxite, and smelters are stockpiling stocks."

CRU estimates that shutting down in winter will reduce the output of China's alumina by 1 million 200 thousand tons this year, while J.P. Morgan estimates a reduction of 1 million 500 thousand tons.

"But there's still an extra risk of shutting down. "Some cities in Shanxi are not on the list, and there are many alumina refineries in Shanxi," Everiss said.

He also said that unconfirmed reports showed that Jinzhong and Lvliang would cut production, and Lvliang had 12 million tons of alumina capacity.

Analysts said that although alumina prices are expected to remain high before spring, the market is bound to decline after the winter production cuts are announced in mid March.

Alumina refineries are returning faster than smelters, and new alumina plants outside China will further boost global supply.

Emirates Global Aluminium will start an annual capacity of 2 million tons of alumina plant next year, while the PT Well Harvest Winning Alumina in Indonesia refinery capacity is expected to double to 2 million tons. The latter is a joint venture between the Indonesian Harita group and the Chinese overseas chinese.

"Since this is a large supply of commodities to enter the market only Chinese, we believe that the recent price rally some short-sighted, we maintain the bearish market outlook is expected to alumina," says in a October 10th report that.








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