Pricing change happening in the alumina market

The emergence of China as the single biggest buyer of both raw materials was an underlying driver of the changes to pricing in both markets. But while the country continues to suck in huge amounts of iron ore to feed its ever expanding steel sector it seems to be moving towards self sufficiency in alumina.

Alumina imports have slumped this year. June's tally of 70,000 tonnes was the lowest monthly total in a decade. There can always be something of the one off in any one month's figures, particularly for what is a bulk commodity. But June's reading is part of a strengthening trend.

Alumina imports slid by 16% last year and the drop has steepened this year with H1 imports slumping by 57% to 1.02 million tonnes. That tallies with a tectonic shift in China's domestic alumina supply demand dynamics. While production of primary metal has been booming hitting a record annualized run rate of 19.4 million tonnes in June that of alumina has been growing even faster.

According to production figures released by the National Bureau of Statistics, aluminum production rose by 13% YoY in June while alumina output jumped by 29%. Similarly H1 growth in metal production of 5.6% was eclipsed by the 18% growth in alumina output. The result has been the closing of the historical alumina supply demand gap in China.

The official production figures imply a further shift to alumina surplus in the first half of this year, albeit to the tune of a marginal 200,000 tonnes. With more smelter start ups expected in the coming period the domestic alumina market could easily flip back to deficit but again, it the longer term trend that is important.