Chinese alumina prices reach 13-year high despite slower operations, buying

Domestic alumina prices in China continued to climb in the week to Thursday October 21, with new transactions being made on an as-needed basis, Fastmarkets has heard.

Fastmarkets’ weekly price assessment for alumina, metallurgical grade, exw China, was 3,900-4,150 yuan ($610-649) per tonne on Thursday, up by 100-150 yuan per tonne from 3,800-4,000 yuan last week.

Alumina prices have now reached a 13-year high, after setting repeated year-to-date highs since late May this year, This has come despite slower downstream demand and the continuing energy crunch that has added to production costs since April.

The electricity curbs in China have led to estimated cuts of 10-20% at operations in the industry, Fastmarkets understands. Further production cuts were expected even although the National Development & Reform Commission has said that it would allow floating electricity prices to rise further from October 15 to remedy the electricity shortages across the country.

Buyers continued to report purchases of small quantities of alumina for restocking this week, however, with prices climbing even higher and some operations slowing.

Deals for around 10,000 tonnes were reported at 4,080-4,150 yuan per tonne, up from 3,800-4,150 yuan per tonne in the week to October 15, although the market has reported fewer deals emerging in recent weeks.

Surging energy prices have lowered the profit margins available upstream, although smelters which faced cost pressures appeared to be able to pass on those costs to customers via higher product prices.

“Although our profit margins are thinner, we are still profitable,” a source from a smelter told Fastmarkets. “The uptrend did take us by surprise, and prices have definitely risen above our expectations. However, our demand is pretty much price-inelastic, in that as long as our smelter continues to operate, we have to buy raw materials at whatever price is being offered to us.”

Meanwhile, downstream buyers have reported that alumina prices, trending higher week-on-week, have reduced the incentive to maintain current production levels. More downstream consumers were now drawing from stocks on hand, and keeping to the market sidelines.

Pre-existing long-term contracts meant that some buyers still had to keep the power on to fulfil commitments, however, even if it meant purchasing alumina at elevated prices.

As a result, even though operations were subdued, most market participants expected domestic alumina to trade at higher prices.

“Both upstream and downstream supplies are affected by the power curbs, which evens-out the drop in demand and provides some support for alumina prices,” a trader said.

Aluminium stocks at SHFE-registered warehouses totaled 248,925 tonnes on October 15. Aluminium inventories had shown four straight weeks of increases, indicating overall softer demand for aluminium in the month.