Fundamentals are mixed; alumina expected to fluctuate

In the overnight session, the most-traded alumina 2505 futures contract opened at RMB 3,449 per tonne, reached a high of RMB 3,449 per tonne and a low of RMB 3,408 per tonne, and finally closed at RMB 3,420 per tonne, down 0.87 per cent. Open interest stood at 158,000 lots, an increase of 1,424 lots. Regarding spot alumina prices, on February 18, SMM alumina was quoted at RMb 3,329 per tonne, down RMB 2 per tonne from the previous trading day.

Ore Market: As of February 18, the SMM Imported Bauxite Index was reported at USD 98.23 per tonne, flat compared to the previous trading day. The SMM Guinea Bauxite CIF average price was USD 97 per tonne, also unchanged from the previous trading day.

Industry Updates:

1. On February 18, transactions of 84,000 tonnes of alumina were recorded in Shandong at a transaction price of RMB 3,340-3,350 per tonne. In Henan, 3,000 tonnes of spot alumina were transacted at a price of RMB 3,400 per tonne.

2. According to SMM, starting February 19, a major alumina refinery in Shandong adjusted its purchase price for 32 per cent ionic membrane liquid caustic soda, reducing it by RMB 20 per tonne from RMB 930 per tonne to RMB 910 per tonne on an ex-factory two-invoice basis (equivalent to approximately RMB 2,844 per tonne on a 100 per cent basis).

Spot-Futures Price Spread Daily Report: According to SMM data, on February 18, the SMM Alumina Index showed a discount of RMB 91 per tonne against the most-traded contract's latest transaction price at 11:30.

Warehouse Warrant Daily Report: On February 18, the total registered warehouse warrants for alumina remained unchanged from the previous trading day at 95,500 tonnes. In Shandong, the total registered warehouse warrants for alumina were unchanged at 4,513 tonnes. In Henan, the total registered warehouse warrants were unchanged at 18,000 tonnes. In Guangxi and Gansu, the total registered warehouse warrants remained at 0 tonne. In Xinjiang, the total registered warehouse warrants were unchanged at 7.3 tonnes.

Overseas Market: As of February 18, the FOB Western Australia alumina price was $520/mt, with an ocean freight rate of USD 19.70 per tonne. The USD/CNY exchange rate sell price was around 7.30. This price translates to an external selling price of approximately RMB 4,532 per tonne at major domestic ports, which is RMB 1,203 per tonne higher than domestic alumina prices. The alumina import window remains closed.

Summary: Overall, on the 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.

On the demand side, some aluminium production capacities in Sichuan and other regions, which were previously undergoing technological transformation, have gradually resumed production, increasing demand for alumina.

On the 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 quotations from bauxite holders. Imported bauxite prices have also declined, potentially reducing alumina production costs. However, current spot transaction prices for alumina in northern China are below the theoretical marginal production cost.

Overall, large-scale production cuts in alumina have not yet occurred, and the spot alumina market remains relatively ample in supply. Spot transaction prices are expected to fluctuate in the short term.

Source: SMM