Commissioning of new alumina capacity delayed against depressed alumina prices

Construction of some new alumina capacities in China slowed against sluggish alumina prices and production cuts at aluminum smelters.

One alumina producer in Henan told SMM that it will postpone the commissioning of newly-built 600,000 mt/yr alumina capacity to August from originally scheduled mid-June. Similarly, an ongoing 200,000 mt/yr alumina project in Inner Mongolia, which was originally scheduled to come online early this year, will not enter operations until July or August this year due to sluggish alumina markets.

Prices for alumina long-term contracts have been tracking aluminum prices down so far this year, with the settlement price for alumina long-term contracts in May down more than RMB 100/mt from January. A number of aluminum smelters have cut or suspended production due to losses from depressed aluminum prices. As of the end of April, over 900,000 mt/yr in aluminum capacity has been cut across China, eroding alumina demand by 1.8 million mt/yr.

Loss-making situation in aluminum markets is spreading into alumina industry, causing some new alumina capacities to be commissioned at a slower pace. Rising imported bauxite prices and increased risks of imported bauxite shortages are pushing up costs at alumina producers relying on imported bauxite. As such, some alumina producers using imported bauxite may scale back output in the future.