Alumina: production cut news from some northern plants causes limited supply disruption

Futures market: Last Friday's night session saw the most-traded alumina 2505 contract open at RMB 3,346 per tonne, reaching a high of RMB 3,414 per tonne and a low of RMB 3,335 per tonne, before closing at RMB 3,368 per tonne, up 0.66 per cent. Open interest stood at 166,000 lots, down 4,000 lots.

Industry Updates:

1. According to SMM statistics on February 14, domestic port alumina inventory totalled 0 tonne, down by 2,300 tonnes from the previous week.
2. According to SMM statistics on February 14, bauxite inventory at nine domestic ports totalled 14.32 million tonnes, down by 390,000 tonnes from the previous week.
3. On February 13, 30,000 tonnes of alumina was traded overseas for March shipment at a transaction price of USD 541 per tonne CIF Kakinada, India. The cargo originated from Australia, Indonesia, or Vietnam.

Spot-Futures Price Spread Daily Report: According to SMM data, on February 14, the SMM alumina index showed a premium of RMB 2 per tonne against the most-traded contract's latest transaction price at 11:30 a.m.

Warehouse Warrant Daily Report: On February 14, the total registered warehouse warrants for alumina increased by 9,306 tonnes from the previous trading day to 55,000 mt. In Shandong, the total registered warehouse warrants increased by 1,802 tonnes to 4,513 tonnes. In Henan, Guangxi, and Gansu, the total registered warehouse warrants remained unchanged at 0 mt. In Xinjiang, the total registered warehouse warrants increased by 7,404 tonnes to 5.04 tonnes.

Overseas Market: As of February 14, the FOB Western Australia alumina price was USD 538 per tonne, with an ocean freight rate of USD 19.7 per tonne. The USD/CNY exchange rate sell price was around 7.28. This price translates to an external selling price of approximately RMB 4,669 per tonne at major domestic ports, which is RMB 1,312 per tonne higher than domestic alumina prices. The alumina import window remains closed.

Reports of production cuts at some northern refineries have minimal impact on supply for now.  Supply-side, some alumina refineries in northern China reported maintenance this week, which may slightly impact alumina supply in the short term. Weekly operating rates for alumina slightly decreased by 0.33 percentage points. Demand side, some aluminium production capacity in Sichuan and other regions undergoing technological transformation may gradually resume production, increasing demand for alumina.

Cost side, due to the sharp decline in spot alumina prices, alumina refineries have significantly reduced their acceptance of high-priced bauxite, leading to lower offers from bauxite holders and a decline in imported bauxite prices. This may reduce alumina production costs. However, current spot alumina transaction prices in northern China are below the theoretical marginal production cost. Overall, large-scale alumina production cuts have not yet occurred, and the spot alumina market remains relatively ample. Spot transaction prices continue to decline and may maintain a downward trend in the short term.

Source: SMM