China exports second large shipment of alumina on higher price and soaring demand

According to a report from Reuters, China is exporting large volume of alumina for the second time this year despite the domestic price rise that is putting pressure on smelters. Chinese alumina suppliers signed contracts to export over 140,000 tonnes of alumina in July at a higher price, according to consultancy CRU.  Chinese customs data shows that is three times higher than the entire volume exported in 2017.

China, which has always exported very insignificant volume of alumina due to strong domestic demand has started focusing in the export market since April this year as the capacity cut in Norsk Hydro’s Alunorte plant in Brazil and U.S. sanctions on Rusal created supply disruption in the international market and lifted the prices.

International alumina prices increased 37 per cent YTD 2018 to about US$560 a tonne, making Chinese exports profitable even though spot alumina prices in China surged by 20 per cent from end-June to RMB 3,300 ($480.07) per tonne.

“The price differential between the rest-of-the-world market and the Chinese market is significant,” said a Europe-based alumina trader, whose usual business of shipping alumina into China has been turned on its head.

The arbitrage shut after the first alumina shipment from China in May and June, but it, according to him is open again, with alumina cargoes directing to Europe, Africa and the rest of Asia.

High alumina prices have lifted alumina segment revenues for China Hongqiao Group almost fivefold YoY inH1 2018. South32 Ltd and Alumina Ltd from Australia also reported higher profits.

Aluminium smelters without their own alumina refineries are suffering from high input costs and further tightening of market is expected due to strike at Alcoa’s  Western Australia refineries. China is also expected to continue with about 30% winter capacity cut for alumina in 28 northern cities this year, further tightening supply. U.S. customers of Rusal will have to wind down business with the Russian alumina/aluminium giant that produces around 6 per cent of global alumina supply by Oct. 23. This will further tighten up the market unless a solution is reached on the matter.