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Affected By China's Environmental Protection Battle, The Shortage Of Alumina Supply Intensified
Oct 21, 2017

Affected by China's environmental protection battle, the shortage of alumina supply intensified

In October 19th, as China began to shut down production capacity in the battle against environmental protection, it is expected that the shortage of alumina will be further intensified in the coming months, forcing smelters to compete for supply, thereby pushing up prices.

Alumina prices have risen 73% since May, and is expected to rise further, but expected early next year, prices may decline, due to refinery China again to resume production after the factory closed in winter at the same time, the new project will be put into operation in other areas.

"There's a perfect storm in the alumina market," says CRU, senior consultant at the AnthonyEveriss. Market sentiment soared before winter cuts."

In order to solve the problem of air pollution in winter months, China has implemented the most stringent measures for heavy industries, including aluminum and alumina plants.

Senior analyst WoodMackenzie AmiShivkar said, before the winter production opened the prelude, production of alumina buyers mainly focus aluminum smelter, instead of alumina refinery and the production of bauxite mine.

She said that some smelters speculated that due to the decline in aluminum production, alumina supply will be surplus, suppress prices, so they postponed the purchase.

But the unexpected closure of bauxite mines has created a Domino effect on the supply chain.

Shivkar said: "the smelter inventory gradually reduced, but the tests are unexpectedly bauxite mine."

With the supply of bauxite in the smelter nearly exhausted, Henan began to cut alumina production two months ahead of schedule.

Fully reflecting the shortage of supply, China's bauxite imports surged by 47% in August, while alumina imports surged by 123%.

In the past two months, alumina prices have soared 53% to $469.74 a tonne, according to MetalBulletin's Australian offshore price index, the highest level since the index was launched in August 2010.

Shivkar said, "I think there's still some room for improvement. All the refineries in China do not have the amount of bauxite they want, and smelters are hoarding supplies."

CRU expects the shutdown of winter capacity will lead to China's alumina production this year down 1 million 200 thousand tons, while JP Morgan chase is expected to produce a decrease of 1 million 500 thousand tons.

Everiss said: "but there are still risks of extra capacity shutdown. Some cities in Shanxi are not listed on the list, and there are many alumina refineries in Shanxi."

He adds that unconfirmed reports say Jinzhong and Lvliang will be implementing measures to reduce production, with alumina capacity of 12 million tons.

Analysts said that although the price of alumina to arrange the spring before the high level, but after 3 months of winter production cuts over, prices will fall.

The restart of alumina refinery is faster than that of aluminum smelters, and the start-up of new alumina plants outside China will further enhance global supply.

Next year, the global Aluminum Inc in the UAE will start an alumina refinery with an annual capacity of 2 million tons, while PTWellHarvestWinningAlumina's Indonesian refineries are expected to double their capacity to 2 million tons. The latter is a joint venture between the Indonesian Harita group and the Chinese overseas chinese.

In October 10th, Macquarie said in a report: "since this is a large supply of commodities to enter the market only China, we believe that the recent price rally some short-sighted, we maintain the bearish market outlook is expected to alumina."

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