China’s Feb alumina import drops; yearly import to shrink after 30% smelter capacity cut

China is sitting on a huge inventory of alumina. Despite the fact that the Chinese government has recently come down heavily on the alumina refineries (and smelters) and mandated that they reduce capacity by 50 per cent in order to support the Centre's fight against pollution, the low-cost capacity addition in recent times seems to be making up quite well for the supply shortage for some time now, at least. In addition to the new refinery starts, there are alumina imports which have remained reasonably high over the years.

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However, the General Administration of Customs data released on February 24, shows China's alumina imports in February 2017 have declined 47.64 per cent year-on-year. The total alumina import for the month was estimated at 265,766 tonnes. China imported 63,298 tonnes of alumina from India, 30,035 tonnes from Indonesia, and 7,763 tonnes from the US. Total alumina imports from Australia (147,133 tonnes) and Vietnam (13,429 tonnes) to China dropped 59.03 per cent and 52.36 per cent YoY respectively.

An analysis of the yearly alumina import data of China reveals a declining trend since 2015:

China imported 1.64 million tonnes of alumina, valued at US$630.89 million in 2015, which dropped by 15.9 per cent YoY to reach 1.384 million tonnes in 2016. The value of alumina imports last year was estimated at US$512.28 million, down 18.8 per cent from the corresponding period previous year. In 2017, till November, China is estimated to purchase 0.987 million tonnes of alumina worth US$362.3 million from the global sellers of the commodity.

China's total output of alumina, the key electrolytic agent for aluminium smelting through Hall–Héroult process, stood at 5.185 million tonnes in February 2017, up 22 per cent from the same period previous year. The total alumina production for January-February was 10.769 million tonnes, up 21.8 per cent YoY. The alumina output for March is estimated to reach 5.772 million tonnes, up 11.32 per cent MoM.

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In one of its latest reports Deutsche Bank had predicted that China is likely to import between 2.5 and 3 million tonnes (net imports) annually during next five years, to meet demand from aluminium smelters (new as well as old restarts). This would result in stable and even higher global alumina prices in 2017 and beyond.

"Tighter alumina market in 2016 had resulted in rising alumina prices, while from 2017 onward, new lower-cost refining capacity additions should keep pace with smelter additions, with alumina imports the balancing item," observed an industry expert.