Alumina capacity in China to expand by 6.2 million tonnes in 2020, estimates SMM senior aluminium analyst

Liang Xuan, a senior aluminium analyst at Shanghai Metals Market, estimates China’s alumina market to turn into a “tangible surplus” in the fourth quarter of 2019, as the newly started refineries ramp up their domestic production and import arbitrage window opens.

As per Liang’s estimation, alumina capacity in China will likely expand by 2.5 million tonnes on an annualised basis in 2019 and 6.2 million tonnes in 2020. China has a built-in alumina capacity of 83.6 million tonnes, with 70.94 million tonnes of metallurgical-grade capacity in operation.

On Thursday, November 7, Liang pointed out at the 2019 South China Metals Summit that in September, metallurgical-grade alumina supply in China was in a moderate surplus of 2,000 tonnes as the recovery of idled capacity slowed than expected, besides production cut at some refineries.

Meanwhile, production ramp-up at EGA’s 2 million tonnes refinery in Abu Dhabi, resulting in overseas supply jump, and restart of Hydro’s 3.2 million tonnes plant in Brazil knocked Australia alumina FOB prices to $280 per tonne, down from $323 per tonne at the end of June.

Growth in alumina supplies is expected to lead to a further drop in alumina prices, resulting in a gradual weakening of aluminium prices.

Liang also estimates the social inventories of primary aluminium ingots in China to fall to 700,000 tonnes to 750,000 tonnes by the end of the year. As of November 7, the inventories are at 853,000 tonnes.

Aluminium consumption in China’s building sector is expected to rise 2 per cent from 2018 to 9.47 million tonnes, Liang added. But in the transport sector, consumption is likely to drop by 13.52 per cent to 6.79 million tonnes. As a result, the overall aluminium consumption in China is expected to dip 1.48 per cent this year.