Alumina Outlook for H2 2017: Market to be in little surplus & prices will get moderated

Driven by the unstoppable China appetite, alumina prices have rallied till now in H1 2017. But a look at the current price trend will reveal a moderating pace. With China slashing aluminium smelting capacity in major production hubs and further production control looming large for Q4 FY 2017-18, the demand for the commodity is expected to weaken in the short to medium term, and this will get reflected in alumina prices for H2 2017. Currently, alumina prices are holding on around US$300-310 per tonne.

So, will the alumina prices drop? - Unlikely, because there is a steep increase in alumina input cost. Caustic soda is getting costlier. Its prices have risen by 11 per cent; further, China will be soon restarting its high-cost aluminium capacities filling the gap left by the exit of low-cost capacities like Xinjiang East Hope, Shandong Weiqiao and Shandong Xinfa. These factors will act mutually to ‘push-pull’ alumina demand in the global market thereby buoying prices to a moderately high level.

In the last couple of days, alumina prices have touched the highs of US$350 per tonne. Later, it fell back in the range of US$305-310 per tonne. The below graph shows alumina price trend as recorded by Shanghai Metals Market in China for H1 2017:

Coming to global alumina output, the market was in marginal surplus in 2016. This year too, there is estimated to be a little surplus amounting to around one million tonne, observed TK Chand, CMD, National Aluminium Company Limited (NALCO) of India, in a recent interview with The Economic Times. Alumina production for 2017 is estimated to reach 122.4 million tonnes, whereas alumina consumption will lag behind by nine lakh tonnes to one million tonnes. Hence, the supply surplus will put the lid on alumina price rise in H2 2017.

As per World Aluminium statistics, total alumina production for May 2017 stood at 11,108 thousand tonnes.

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The total world alumina refinery production was recorded at 118,000 thousand tonnes (118 million tonnes), the U.S. Geological Survey noted in their latest Minerals Information report. So, going by the production forecast, it will increase by another 4.4 million tonnes globally in the second half of the current calendar year.

The top alumina producers who will continue to dominate the market in 2017 are Chalco, Xinfa (China), Hongqiao (China), Rusal, Rio Tinto Alcan, Alcoa, Norsk Hydro, South 32 (Australia) and Nalco.

For the Indian integrated aluminium producer, Nalco, alumina remains the major stronghold. The company is augmenting that particular arm by putting up a new refinery for which it has already got the environment clearance. “Our contracts are in position and we are will be starting work within a month or two,” Chand confirmed.

“This year we will be producing 100%. Our normative capacity is 2.1 million tonne and we will be achieving or may be even surpassing it. The new capacity in any case will come up three year or three and a half years hence and then it will increase by one million tonnes,” he concluded.