Chinese alumina prices slip amid weak demand

Alumina prices were down in China this week as the weakness in the aluminium market tamed demand for raw materials.

Chinese port prices for alumina were around 2,570-2,590 yuan ($418-422) per tonne fot in Lianyungang of Jiangsu province, compared with 2,570-2,600 yuan per tonne last week.

Alumina was offered at $320-321 per tonne fob Australia during the week, compared with $319 last week. No deals were heard.

"There is no enthusiasm for aluminium smelters to buy alumina, as aluminium prices are so low that some smelters are facing the prospects of bankruptcy," a major trader said.

On Thursday March 13, the Shanghai Futures Exchange June contract closed at 13,215 yuan per tonne, down 5.4% year to date. The contract touched 13,095 yuan on Monday, the lowest since June 3, 2009.

On the Changjiang Nonferrous Metals market, the spot aluminium price was at 12,680-12,720 yuan per tonne on Thursday.

The light metal has been in a downside channel since October 30, as ailing local demand and rising supply pressured prices.

"Given the [spot] prices are around 13,000 yuan, aluminium smelters are losing money for each tonne of aluminium they are producing," another trader said.

Production cuts by aluminium smelters are being seen around the country, especially in south-west China, including the Guizhou province.

"Production cuts are a long-term scenario now. Demand from these smelters will be zero as long as they don't resume operations," the first trader said.

Outlook

Market participants are divided on outlook.

"Alumina prices will remain depressed as aluminium will be struggling around low levels for a while," the first trader said.

Competition for sales will also intensify among local alumina makers supporting prices, other market participants pointed.

"Recently, for example, more shipments are flowing to Qinghai-based smelters from south-west regions like Guizhou and Guangxi. In the past, Henan and Shanxi refineries were main suppliers to Qinghai," Liu Xiaolei, an analyst at SMM, said.

Some refineries are still making profits despite given their production costs as low as 2,000 yuan per tonne, according to market sources.

"It may prove hard for local alumina prices to fall further, as alumina refineries may follow smelters to cut production," a Zhejiang-based alumina final user said.

Some also anticipated new capacity coming on stream in north-west regions like Xinjiang to drive demand for alumina.

Imported alumina

As for imported alumina, most see little room for further falls.

"It is just a matter of purchase amount for those who signed long-term sourcing contracts, they have to import every month, this is rigid demand," Liu said.

Imported alumina tends to have better quality, according to market participants.

"For smelters, imported alumina containing less lithium can help them lower power consumption, a cost-saving measure," Liu said.

"We have been mainly using imported alumina, as it contains less potassium and sodium," the Zhejiang-based end-user said.