Increased low-priced transactions domestically and internationally, alumina prices are expected to decline in the short term

[SMM Morning Comment on Alumina: Increased Low-Price Transactions Domestically and Internationally, Short-Term Alumina Prices Expected to Decline] : Recently, the weekly operating rate of alumina has continued to increase slightly, with no significant changes on the demand side. Low-price spot transactions have been frequent in the market, with a larger decline compared to earlier periods. In Henan, the spot transaction price this Thursday was RMB 4,050 per tonne, down RMB 830 per tonne from last Thursday's price of RMB 4,880 per tonne. However, as of now, alumina capacity has not yet entered a state of large-scale losses. Alumina supply is expected to maintain a high operating rate in the short term, with the supply and demand fundamentals remaining in a slightly surplus state. Overall, spot alumina prices are expected to continue their downward trend in the short term. Close attention should be paid to bauxite transaction prices, alumina costs, and overseas spot alumina prices in the near term.

SMM Morning Comment on Alumina for January 17

Futures Market: During the night session, the most-traded alumina 2502 contract opened at RMB 3,694 per tonne, reached a high of RMB 3,735 per tonne, a low of RMB 3,640 per tonne, and closed at RMB 3,658 per tonne, down RMB 36 per tonne or 0.97 per cent. Open interest stood at 97,600 lots, an increase of 3,305 lots.

Industry Dynamics:

1. US-based industrial innovation company Brimstone announced a significant plan to produce smelting-grade alumina using the country's abundant carbon-free calcium silicate rocks through its innovative process, aiming to eliminate reliance on imported bauxite. This facility could become the first new domestic source of smelting-grade alumina in the US in decades.
2. Overseas Alumina Transactions: On January 15, 25,000 tonnes of alumina was transacted overseas at a price of US$581per tonne Go Dau, Vietnam, for March shipment.
3. According to SMM data, as of this Thursday, the national weekly operating rate of alumina increased by 0.49 percentage points W-o-W to 87.25 per cent. Among them, the weekly operating rate in Shandong remained flat WoW at 92.11 per cent; in Shanxi, it increased by 2 percentage points W-o-W to 81.40 per cent; in Henan, it remained flat WoW at 70.00%; and in Guangxi, it remained flat WoW at 93.94 per cent.
4. Spot Alumina Transactions: In Henan, 8,000 tonnes of spot alumina was transacted at a price of RMB 4,050 per tonne with a one-month payment term.

Spot-Futures Price Spread Daily Report

According to SMM data, on January 16, the SMM alumina index showed a premium of 988 yuan per tonne against the most-traded contract's latest transaction price at 11:30.

Warehouse Warrant Daily Report: On January 15, the total registered warehouse warrants for alumina increased by 299 tonnes from the previous trading day to 43,200 tonnes. In Shandong, the total registered warehouse warrants remained flat at 901 tonnes; in Henan, they remained flat at 12,000 tonnes; in Guangxi, they remained flat at 0 tonne; in Gansu, they remained flat at 0 tonne; and in Xinjiang, they increased by 299 tonnes to 30,300 tonnes.

Overseas Market

As of January 16, the FOB Western Australia alumina price was US$610 per tonne, with an ocean freight rate of US$20.9 per tonne. The USD/RMB exchange rate selling price was around 7.35. This price translates to an external selling price of approximately RMB 5,321 per tonne at major domestic ports, which is RMB 622 per tonne higher than domestic alumina prices. The alumina import window remains closed.

Summary

Recently, the weekly operating rate of alumina has continued to increase slightly, while there has been no significant change on the demand side. Low-priced spot transactions have been frequent in the market, with a larger decline compared to earlier periods. In Henan, the spot transaction price on Thursday was RMB 4,050 per tonne, down RMB 830 per tonne from last Thursday's price of RMB 4,880 per tonne. However, as of now, alumina capacity has not entered a large-scale loss-making state. Alumina supply is expected to maintain a high operating rate in the short term, with the supply-demand fundamentals remaining in a slightly surplus state. Overall, spot alumina prices are expected to continue their downward trend in the short term. Close attention should be paid to bauxite transaction prices, alumina costs, and overseas spot alumina prices in the near term.

[The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make prudent decisions and not substitute this for independent judgment. Any decisions made by clients are unrelated to SMM.]