Reuters
China aluminium smelters may turn to spot shipments of alumina in 2014
Edited by : AL CIRCLE
2 min read
Some aluminium smelters in China, the world's top producer and consumer of the metal, could in 2014 turn to spot shipments or short-term contracts for raw material alumina as the ratios used to calculate annual term contracts climb, trading sources said.
Smelters are effectively betting on low spot prices for alumina, although - ironically - rising demand for spot imports could support prices for the raw material, in turn buying prices for aluminium that are stuck near 4-year lows.
China churns out nearly enough alumina to meet its current aluminium-production needs, but more smelting capacity is expected to come online next year, making some smelters and traders keen to secure imports. About 2 tonnes of alumina are used to produce 1 tonne of metal.
Global sellers had last month offered China buyers 2014 alumina shipments at ratios of 17.5-17.8 percent of London Metal Exchange (LME) aluminium prices , free on board, traders and sources at Chinese smelters said. Offers were raised to 17.8-18.5 percent in the past week for Australia and India origins due to uncertainty over the outlook for supply.
Two sources said some deals had been agreed at 17.8 percent, compared to 16.1-16.3 percent in 2013.
A rate of 17.8 percent of Thursday's LME aluminium price of $1,758 would work out at $313 per tonne of alumina, FOB. While that was well below spot prices of about $326 last week, some buyers are betting that spot prices will fall.
Most Chinese alumina importers and sellers were still in talks on 2014 shipments, with both sides assessing the impact on global supply of Indonesia's planned ban on ore exports next year and the uncertain outlook for Rio Tinto's Gove alumina refinery in Australia, the smelting sources said.
Indonesia provided nearly 70 percent of China's bauxite imports in the first 10 months of this year. Alumina is produced from bauxite, before being refined into aluminium.
Rio Tinto said this week it was reviewing the future of its loss-making Gove refinery, which produced 1.6 million tonnes of alumina in the first nine months of 2013.
Smelters are effectively betting on low spot prices for alumina, although - ironically - rising demand for spot imports could support prices for the raw material, in turn buying prices for aluminium that are stuck near 4-year lows.
China churns out nearly enough alumina to meet its current aluminium-production needs, but more smelting capacity is expected to come online next year, making some smelters and traders keen to secure imports. About 2 tonnes of alumina are used to produce 1 tonne of metal.
Global sellers had last month offered China buyers 2014 alumina shipments at ratios of 17.5-17.8 percent of London Metal Exchange (LME) aluminium prices , free on board, traders and sources at Chinese smelters said. Offers were raised to 17.8-18.5 percent in the past week for Australia and India origins due to uncertainty over the outlook for supply.
Two sources said some deals had been agreed at 17.8 percent, compared to 16.1-16.3 percent in 2013.
A rate of 17.8 percent of Thursday's LME aluminium price of $1,758 would work out at $313 per tonne of alumina, FOB. While that was well below spot prices of about $326 last week, some buyers are betting that spot prices will fall.
Most Chinese alumina importers and sellers were still in talks on 2014 shipments, with both sides assessing the impact on global supply of Indonesia's planned ban on ore exports next year and the uncertain outlook for Rio Tinto's Gove alumina refinery in Australia, the smelting sources said.
Indonesia provided nearly 70 percent of China's bauxite imports in the first 10 months of this year. Alumina is produced from bauxite, before being refined into aluminium.
Rio Tinto said this week it was reviewing the future of its loss-making Gove refinery, which produced 1.6 million tonnes of alumina in the first nine months of 2013.
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