Alumina index holds at all-time high ahead of tender results

Metal Bulletin’s daily fob Australia alumina index settled at $672.50 per tonne today, unchanged from the previous day’s calculation.

Spot prices are up 41% from a week ago, after concerns over tight supplies of the raw material swelled following the US Department of the Treasury’s decision to place sanctions on UC Rusal.

The Russian aluminium producer subsequently announced force majeure on some of its alumina shipments, forcing buyers to hike their bids to secure prompt spot units in their required location.

“It’s just hard to find shipments in the right place at the right time,” a trader source said.

“You’re paying sky-high premiums for certain origins,” a second trader added.

The Atlantic region has been particularly tight over the past six weeks while Hydro’s Alunorte refinery in Brazil operates at 50% capacity, after concerns that severe rainfall had resulted in water contamination. Hydro said reviews found no indications of contaminations at the refinery in April.

A cargo of alumina traded in the Atlantic as high as $800 earlier this week, but market participants preferred to wait for the outcome of two tenders in the Pacific before making a call on the fob Australia price.

Nonetheless, smelters are able to digest higher alumina prices, as aluminium prices and premiums have also rallied in response to concerns over the Rusal sanctions.

“When you’ve got the London Metal Exchange going up 5% some days, people can work with higher alumina prices,” the second trader added.

The three-month aluminium price on the LME settled at $2,587 per tonne on April 19, up 17% in a week.

However, with alumina trading at 26% of the metal price, others emphasized that such price levels for alumina would not be sustainable in the long run, especially since the majority of producer sales are tied to a basket of spot indices.

Furthermore, the tightness and highest prices are most acutely felt for cargoes loading within the next month, meaning higher prices may not prove necessary in all cases, sources added.

Metal Bulletin’s alumina index takes into account material to be loaded within two months.

“There’s a short-term panic for anything very nearby, but anything four weeks or more from now, you can ship from elsewhere,” the first trader said.