China’s alumina prices rise as smelters and traders stock up

Alumina prices in China are on a high as smelters increase their alumina purchases from domestic and international markets with plans to restart soon and with traders stocking up on alumina on anticipation of further price hike in the future.

The strong aluminium buying trend is likely to push up the price of raw materials which has already risen by 10 percent since June for delivery to China.

Since merchants are building their stocks and smelters are looking to increase their production, prices might remain strong for the rest of the year, a trading manager at a private alumina producer said.

The colder northwestern provinces like Xinjiang, which is in fact the largest aluminium producing region, are buying in bulk to stalk up on alumina for the winter when the rail and road transportation is slow according to traders and sources from aluminium smelters.

Another factor contributing to the increase buying is the increased lending at the Chinese banks. An executive of a state-owned smelter said that during the first half of the year, smelters had restricted their stock building doe to the tight credit conditions.

The executive also predicts that the alumina prices could rise to Yuan 3,000/mt by the end of 2014. The spot prices have already risen to about Yuan 2,700 ($439) per tonne from 2,3000-2,400 in June in the domestic market.

With Chinese smelters reopening their idled capacities, they could add about 2.2 million tonnes of aluminium in the second half, a bulk of which would be in the fourth quarter.

The high capacity production is pushing up the alumina prices. There are repots of Chinese importers paying $360-370/mt for alumina CIF Australia while the same was prices at $330 in June. There are also reports of alumina going for $375 in an eastern Chinese port as per an international trading house employee.