China alumina and aluminium prices are on a downtrend with the start of capacity cut drives

Both alumina and aluminium prices are on a downward trend after actual winter cuts have started in China.

As updated by Shanghai Metals Market, average spot alumina price in China stands at RMB 3558/t on November 20, a further drop from RMB 3593/t on November 17. SMM expects the spot prices to stay within RMB 3558 per tonne today. Domestic spot alumina prices have dropped further to RMB 3545/t today from RMB 3565/t on November 17.  Domestic prices are expected to range within RMB 3470 – 3620 per tonne today. Today’s spot alumina prices in the domestic markets are shown in the table below:

Though Chalco alumina prices remain unchanged, imported alumina prices have registered a drop in China. Average imported alumina prices drop RMB 50/t for the first time to RMB 3700/t since mid-October.

With the closure of illegal capacity new and legal alumina capacity is coming up in China. On Nov.16th, an ecological alumina project of 1 million annual capacity started construction in Guangxi. Total investment of the project stands at RMB 3.8 billion with designed capacity of 2 million tonnes per year. The first phase of construction plans 1 million tonnes of capacity and within a year. After the launch of production, annual value of production will reach RMB 2.8 billion.

According to the ministry, after the starting of capacity cut process, the ministry will carry out spot checks by January, 2018, as well as assess producers’ output cuts, by checking their power consumption data through the power departments.

SHFE Aluminum has been steadily dropping this month. The most active AL1801 contract fell sharply under the support level. It is under RMB 15,200 / ton and may decline to RMB 15,100 / ton. The downtrend is generating concern in the market. Hedging stock holders offers as per premium of futures. Middleman and downstream enterprises are on a wait and watch mode.