Chinese alumina prices weak; govt intervention may halt further production cuts

Chinese alumina prices remained weak this week amid sluggish demand ahead of the long weekend.

Alumina was offered around $319 per tonne fob Australia this week, compared with $317-318 per tonne last week, according to market participants.

"The suspension of alumina loading at a Norsk Hydro facility has boosted overseas prices but Chinese buyers are not interested in importing at the moment," a Beijing-based analyst said.

Loading of alumina at Alunorte has been suspended by the local environmental watchdog, but its production continues unaffected, Norsk Hydro said on Tuesday April 1.

China port prices for alumina were flat at 2,540-2,550 yuan ($412-413) per tonne fot in Liangyungang of Jiangsu province this week.

"Trading of imported alumina has been stable, with most transactions done for 200-300 tonnes. Few are buying 1,000 or 2,000 tonnes," a dealer said.

On the local spot market, alumina was at 2,180-2,520 yuan per tonne on Thursday April 3, unchanged from the level on March 28.

Spot trading was slim this week and "many have delayed signing deals due to the looming Tomb Sweeping Day in China on Monday April 7," the analyst said.

Some small alumina makers were seen undercutting prices in the past week.

In Henan, the mainstream prices were around 2,480 yuan while some smaller producers were selling at 2,400 yuan per tonne, market sources said.

In Guangxi, a few were selling at 2,170 yuan per tonne, below the mainstream minimum level of 2,180 yuan per tonne, according to market participants.

"Some small alumina makers are struggling and they don't want too much inventory on hand, so they chose to dump material for cash," a trader said.

Outlook

Market participants are mixed towards outlook.

"The fundamentals are still not good and any rebounds won't last," the Beijing analyst said.

Others saw a balanced market.

"Few aluminium smelters out of Guangxi and Guizhou are seriously cutting production due to resistance from local governments," a market source said.

As an example, Shenhuo Group in Henan was slated to halt 100,000-tpy capacity but failed to do so due to local government intervention, according to market sources.

"The local government asked the company to wait for a while," the market source said.

"There are talks that in Henan, local governments are providing help to smelters to keep factories running. Measures include guaranteeing bank loans or tax exemption for smelters," another source said.

"Some smelters announced production cuts just to give the local government signals that they need help," the source said.

The recent rebound in aluminium prices have also mitigated the need to reduce production.

Aluminium prices have been in an upside trend since March 21. On Shanghai Futures Exchange, the June aluminium contract has gained 2.7% since March 21 to reach 13,110 yuan per tonne on Thursday April 3.

"New capacity coming on stream in north-west part of China should offset reductions in south-west China. The (alumina) market is in balance in general," Liu Xiaolei, SMM analyst, said.