Sanction against Rusal drives a quick surge in alumina export from China

The sanctions against Rusal, world's second-biggest aluminium producer and a major alumina producer have created supply concerns in both the alumina and aluminium market.  Before the sanctions, Hydro’s Alunorte refinery in Brazil was forced to cut outputs by half earlier in the year due to leakage in bauxite residue plant. Both these incidents have caused a shortfall in the alumina market sending prices soaring.

A mining Weekly report says multiple shipments of alumina are being exported from China, driven by the supply concerns as a side effect of U.S. sanctions on Russian producer Rusal. It is also reported that major suppliers are agreeing deals of up to 500,000 tonnes to various companies.

China is the biggest global producer and consumer of alumina, which is refined from bauxite ore to be smelted into aluminium metal.

According to two alumina market sources, Chalco, the largest state-owned aluminium producer sold a shipment of 30,000 tonnes in the past week.   Sources also confirmed that the companies were not selling directly to end-users but supplying to international trading companies.  However, there have been no official statements from the concerned companies.

The surge in exports is unexpected in a country like China where almost the entire domestically produced alumina is absorbed by the aluminium smelting industry. Customs data showed it exported only 55,737 tonnes of alumina last year. According to UBS, global alumina supply is forecast at 126-million tonnes this year with Rusal contributing about 6% of it.

"It's the first time I've ever seen this, in eight or nine years," said one London trader. "I've never seen a 30,000 tonne cargo come out of China."

It could be a temporary phenomenon as local prices rose to keep the alumina in the domestic market. Global alumina prices rose above $700/t from about $450 after the sanctions were imposed, but they have slowed down last week after the US extended the sanction deadlines. Domestic alumina prices in China have increased by about 15% since mid-April.