June 2022 witnessed the commissioning of 8.45 million tonnes of new alumina capacities in China, including Jingxi Tiangui’s Phase II project with 850,000 tonnes of capacity, Bosai Wanzhou with 4.8 million tonnes, Hebei Wenfeng with 2.4 million tonnes, and Aokaida Chemial with 400,000 tonnes. Another 4.45 million tonnes of alumina capacity is also expected to come into production, bringing a total amount of 12.9 million tonnes of new capacity this year.
Given the commissioning of new alumina capacities, high-cost alumina refineries are likely to face huge pressure, especially those located far away from ports like the ones in Shanxi, Henan and Guizhou. On the other hand, refineries in inland areas like Shandong, Guangxi and Hebei will lack cost advantages over their competitors, considering the falling domestic bauxite supply.
Alumina prices have also been on bearish trend since May 16 as a result of the gradual release of new capacities. SMM estimates the prices to drop further in the future in view of the excess supply. Alumina refineries in high-cost areas are struggling to survive due to rising bauxite and caustic soda prices, resulting in production cuts due to shrinking profit margins and bauxite shortages. For instance, a refinery slashed its capacity from 1.2 million tonnes to 400,000-450,000 tonnes at the beginning of June, while another refinery reduced operating capacity from 1.5 million tonnes to less than 1.2 million tonnes, affecting the output by 1,000 tonnes per day.
On the whole, the current sluggish alumina prices in Shanxi and Henan have affected local refineries. According to SMM, high-cost alumina refineries will try to put pressure on high-priced bauxite so as to alleviate their cost pressure.
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