Global alumina market may experience disrupting Q2 due to the Ukraine-Russia stand-off

In the second quarter (Q2) of 2022, the global alumina market is envisaged to be in a state of uncertainty, as the after-effects of the Russia-Ukraine conflict and a slew of interconnected variables threaten to shift supply and demand fundamentals. The embargo on alumina and bauxite shipments to Russia imposed by Australia on March 20 resulted in an immediate worldwide oversupply. In Q2 market investors will be keeping an eye on Rusal’s worldwide holdings and how it will shape its business overseas by distancing itself from Russia. There will also be an emphasis on the growth in supplies from Australia.

Following Australia's export prohibition, market players will be watching Rusal's subsequent alumina supply, with fresh talk of Chinese domestic alumina exports filling the supply gap. Prices fell to US$478 per tonne FOB at the end of the first quarter, slipping below the critical US$400 per tonne threshold on April 8.

The benchmark Platts Australia alumina daily assessment reached new highs in the first quarter of 2022, surpassing levels not seen since US sanctions on Russian aluminium producer Rusal and refinery output cutbacks at Brazil's Alunorte in 2018. Alumina evaluations FOB Western Australia soared at $533 per tonne in Q1, exceeding the previous high of US$484 per tonne in Q4 2021.

After the Beijing Winter Olympics, the alumina market worldwide prices was expected to fall in Q1, but this did not happen. Domestic pricing in China was an exception since refining capacity in northern China was steadily enhanced following the games.

“Australian cargoes that were imported into China before the war and stored at bonded warehouses might be an alternate source of sales to Russia, though it’s not certain if and how the export ban could actually be retrospectively implemented on these goods, since they already arrived on Chinese shores earlier,” added a trader.

According to Russia's Federal Customs Service, the nation imported 1.52 million tonnes of alumina from Australia in 2021, accounting for a third of the country's total 4.7 million tonnes of alumina imports. Rusal's alumina refineries in Ukraine, Ireland, Guinea, and Jamaica contributed 2.65 million tonnes to the total. The first prompt 30,000 tonnes Western Australia shipment traded for $510 per tonne FOB on March 24. However, because of its end-March laycan, it was unable to be transported to Russia, according to market players, and was then reoffered to the market on short notice.

Based on the data from S&P Global, Platts had rated China's domestic alumina at a top of RMB 3,310 per tonne EXW in mid-February, roughly RMB 1,000 per tonne lower than the record high assessment of RMB 4,120 per tonne EXW in October 2021. In light of the present geopolitical situation, Rusal's investments in the Aughinish refinery in Ireland and the Queensland Alumina Limited refinery in Australia raise the risk of production and trade flow interruptions.

In 2021, China, the world's largest alumina producer, exported 780 tonnes to Russia, a pittance in comparison to the amount arriving from traditional destinations. According to insiders, China's following alumina exports will provide light on local pricing fluctuations, as it remains to be seen how additional demand and production capacity for Chinese alumina will balance.