Mysteel: China alumina prices continue downward trend amid oversupply

On Oct 28, Mysteel daily assessments for Shanxi spot alumina were RMB 2,830-2,880 per tonne, EXW and including VAT, down RMB10 per tonne from a week ago, and assessments for Guangxi spot cargo were RMB 2,990-3,040 per tonne, down RMB 50 per tonne on week. SHFE most-traded contract closed at RMB 2,817 per tonne, up RMB 7 per tonne on week.

The price decline in China's alumina market slowed down last week. However, the pessimistic sentiment remains unchanged. We observed high alumina supply and elevated alumina stocks in China, which remained major drivers for the downward trend.

On the supply side, China's alumina operating capacity stood above 97 MTPA last week. Despite shrinking margins in the alumina sector, most refineries still maintained high and stable run rates. This, combined with the expectations of a sharp rise in alumina imports in October, will lead to an expansion of the supply surplus in October. On the demand side, China's aluminum operating capacity stood unchanged at 44.55MTPA as of Oct 23, and the operating rate remained at 97.8 per cent. We expect a limited aluminum production increase in Q4 based on our tracking on new projects. Some aluminium smelters showed increasing restocking demand of late, leading to active spot trade. The increase in procurement of spot cargoes was not only for restocking ahead of winter, but also for stockpiling low-cost raw materials before cost-driven production cuts of alumina producers. As of Oct 23, total alumina inventory in China, including the volume at ports, in refineries and smelters, and the tonnages at platforms/in transit was 4.69 million tonnes, up 1.1 per cent on week and 21.4 per cent higher than the same period last year.  We expect that total stocks will keep piling up in the near term due to high alumina production.