China’s alumina refineries may face losses in Q4 2020 due to higher production costs and lower selling prices: anticipates Joyce Li

At the 2020 Nonferrous Metals Industry Chain Annual Conference in Suzhou, Joyce Li, senior analyst at SMM, noted that China’s alumina market would likely see a supply deficit of 361,000 tonnes in 2020, with annual average operating rate at refineries at 78.03 per cent.

“Operating rates at Chinese alumina plants hovered at low levels in 2020, and demand and supply of alumina remained in tight balance,” said Li.

Li mentioned that there were 68.65 million tonnes of alumina capacity in operation as of early December among 88.4 million tonnes per year of existing capacity. In the first ten months of 2020, China produced 55.74 million tonnes of metallurgical-grade alumina, down 3.23 per cent year-on-year. By the end of the year, the output is expected to reach 67.54 million tonnes, 1.65 per cent lower than a year ago.

Besides, China imported 3.15 million tonnes of alumina during January-October, an increase of 205.15 per cent year-on-year. By the end of the year, China’s alumina imports are expected to peg at 3.93 million tonnes, anticipated Li.

As for production costs, Li said the domestic bauxite prices gave up the gains that it obtained in the past two years in the first half of 2020 due to the breakout of the COVID-19 pandemic. Prices only rebounded slightly in the second of the year.

Costs at Chinese alumina producers were the highest in the globe in 2019, and diverged in different provinces. Weighted average cash cost of alumina in China stood at RMB 1,926.9 per tonne in the first three quarters of 2020, while weighed average full cost hovered at RMB 2,187.9 per tonne, with Guangxi and Shandong boasting evident cost advantages.

However, in Q4 2020, alumina production costs are expected to grow as prices of bauxite, caustic soda, and coal are anticipated to increase. This, combined with low alumina prices, may fuel further losses at alumina refineries in Shanxi, Henan, and Inner Mongolia.

2021 is anticipated to be a peak year for the commissioning of alumina capacity in China, while overseas oversupply to intensify and the pressure to increase, Li expected.