China alumina bullish as SHFE aluminium price hits new highs

China’s spot alumina prices were bullish this week as domestic aluminium prices reached a 10-month high last Friday and firmed further on Monday, market participants said.

The front-month aluminium contract on the Shanghai Futures Exchange closed at Yuan 12,830/mt ($1,970/mt) on Monday. The last time the SHFE price was seen above this level was on June 8, 2015, when the front-month price settled at Yuan 12,860/mt. The current price was also up from Yuan 11,940/mt last week and from Yuan 11,660/mt a month ago.

The Platts ex-works Shanxi alumina spot assessment stood at Yuan 1,995/mt full cash terms on Monday, after gaining Yuan 15/mt on Friday. The current price was up Yuan 35/mt from last week and up Yuan 85/mt from a month ago.

The Shanxi price is expected to rise further in the near term and cross Yuan 2,000/mt cash for May spot deliveries as sentiment was strong, sources said.

The spike in aluminium prices was mainly attributed to speculation, but there was also some fundamental support as smelters have yet to restart, sources added.

“Although metal is close to Yuan 13,000/mt now, smelters will be careful to restart … the higher prices also mean some smelters will no longer have power subsidies, which were tied to metal prices, such as in Qinghai. That means their costs will rise so there’s not much profit to be seen from the higher prices, they may still be making losses,” a Shanxi refiner said.

Two South China smelters agreed, adding that it was more likely that Xinjiang smelters will ramp up their operating rates than that idled smelters will restart, as Xinjiang smelters mostly have their own power supply and so would stand to profit most from the higher metal prices.

“But it’s still too early to tell. We must still see if metal prices can sustain since the rise just happened,” a smelter source said.

Meanwhile, in Henan province, spot alumina prices were pegged at Yuan 2,000-2,050/mt cash to full credit terms Monday, up from Yuan 1,980-2,000/mt cash last week. Tradeable ex-works Guangxi prices were also indicated higher at Yuan 1,880-1,890/mt cash on Monday, up from Yuan 1,850-1,860/mt a week ago.

Spot alumina in Henan and Guangxi were also expected to rise in the near term. Henan spot alumina prices were expected to rise to the Yuan 2,000/mt level, while Guangxi prices could reach Yuan 1,900-1,950/mt for May deliveries, sources said.