Alumina prices have been falling for nearly two months, while bauxite prices face significant pullback

From December 11 to 16, 2024, the SMM alumina index price reached a nearly two-year high at RMB 5,769 per tonne. Subsequently, spot alumina transaction prices began to decline. As of February 14, 2025, the SMM alumina index price had dropped to RMB 3,356 per tonne, a cumulative decrease of RMB 2,413 per tonne, falling below the starting point of the alumina price increase that began in August 2024.

During the decline in spot alumina prices, the price of its raw material, bauxite, did not experience a YoY decrease. Supported by the rigid demand for alumina production and new projects, the supply and demand fundamentals of bauxite remained in a tight balance. Underpinned by these strong fundamentals, bauxite prices continued an upward trend for some time after spot alumina prices began to decline. As of now, bauxite prices remain significantly higher than the levels seen in August 2024 and earlier, leading to a substantial narrowing of alumina profit margins.

According to SMM's daily cost-profit model calculations, as of February 14, 2025, theoretical alumina profits had narrowed to RMB 104 per tonne, a decrease of nearly RMB 2,400 per tonne compared to the theoretical profit of around RMB 2,500 per tonne in mid-December. This week, spot alumina prices in northern China fell to approximately RMB 3,200-3,400 per tonne, roughly corresponding to the cash cost of producing alumina from Guinean bauxite at around USD 80 per tonne in Shanxi and Henan regions. Currently, the theoretical full cost of producing alumina using imported bauxite in Shanxi and Henan has exceeded the recent spot transaction prices.

Alumina refineries in Shanxi and Henan have entered a loss-making state, and spot alumina prices in Shandong have also fallen to near cost levels, significantly reducing alumina refineries' acceptance of high-priced bauxite. Bauxite suppliers have also lowered their offer prices, and imported bauxite prices have pulled back under pressure. As of February 14, the SMM imported bauxite CIF price index was reported at USD 98.23 per tonne, down USD 11.03 per tonne W-o-W.

Currently, the bauxite market remains in a state of negotiation between upstream and downstream players, with no recent reports of transactions involving imported Guinean bauxite. Alumina prices have not yet stabilized, and under cost pressure, alumina refineries may find it difficult to accept Guinean imported bauxite priced above USD 100 per tonne. From a supply and demand perspective, on the demand side, only small-scale alumina capacity reductions or technological transformation plans are observed in northern China, with no large-scale production cuts in alumina. Coupled with the raw material demand from subsequent new capacity, bauxite demand remains high. On the supply side, imports of Guinean bauxite are expected to maintain growth, but Australian bauxite imports may decline due to the impact of the rainy season, resulting in an overall tight balance in the bauxite market. Bauxite suppliers still show a sentiment to stand firm on quotes, and there are currently few offers below USD 100 per tonne in the market. In the short term, imported bauxite prices may enter a state of fluctuation.

Source: SMM