China’s domestic alumina prices flat after aluminium price tumbles

Demand and prices for alumina in China were in limbo this week because market participants have become cautious after a steep decline in downstream aluminium prices, Fastmarkets heard on Thursday October 28.

Fastmarkets’ weekly price assessment for alumina, metallurgical grade, exw China, was 3,900-4,150 yuan ($610-650) per tonne on Thursday, flat from a week earlier.

Domestic demand for alumina in China has been bogged down by poor downstream demand for aluminium. Most traders stepped away from active negotiations after the recent fall in aluminium prices on the Shanghai Futures Exchange.

The cooling in domestic aluminium prices came after the recent move by the Chinese government to rein-in soaring coal prices. This provided near-term relief for production costs but sent contract prices on the SHFE falling to their lowest levels since August this year.

The aluminium SHFE daily close, China, price for front-month futures closed at 19,890 yuan ($3,113) per tonne on October 28. The front-month contract on aluminium had reached an all-time high of 24,695 yuan per tonne on October 18.

The production of primary aluminium consumes two tons of alumina to produce one ton of aluminium.

Capping coal prices will reduce production costs within the industry, with the cost savings expected to benefit both alumina processors and consumers of aluminium. And this will translate into higher profit margins overall. But the dramatic fall in aluminium prices after a protracted uptrend this year saw consumers retreating to the market sidelines.

“Yes, production costs across the supply chain may have been curbed, but with aluminium prices also falling every day, the market is quiet. There’s no buying interest for alumina,” a veteran trader based in Beijing said.

Fewer domestic Chinese deals for alumina have emerged this week, and no business was directly reported to Fastmarkets. This was in stark contrast to the more active trading in the week to October 22, with deals for around 10,000 tonnes were reported at 4,080-4,150 yuan per tonne.

Meanwhile, price estimates reported to Fastmarkets this week remained stable, amid the underlying supply tightness.

There were some expectations that this downtrend in aluminium prices would continue, weighing on price sentiment for alumina in the near term.

“This [market] correction in aluminium prices came too abruptly, making it difficult to assess the spot demand for alumina. I expect fewer alumina deals to conclude in the next two weeks,” a second Beijing-based trader told Fastmarkets.

Data compiled by Fastmarkets showed a build-up of inventory in the past five weeks across the country with the slowdown in demand. Aluminium stocks at SHFE warehouses rose to 269,582 tonnes in the week to October 22.