WEEKLY: China alumina extends losses on capacity overhang, even as basis trade lifts physical offtake

China's domestic spot alumina prices continued their gradual downward trend last week, with sporadic discounted transactions emerging in the market, based on Mysteel's survey. The pressure was partly contributed by the persistent expectation of fresh supply coming online in southern China, leaving cargo holders broadly bearish.

On top of that, concerns that deepening industry losses could eventually force voluntary curtailments, together with overseas production headlines and softness in seaborne deal levels, prompted a wave of short-covering that lifted alumina futures on thinning open interest. The underlying physical picture, however, stayed soft, and the September commissioning pipeline in the south has not gone away. As the basis widened, basis traders have been picking up more physical alumina, but it's just moving into warehouse stocks, so inventories will keep building.

On the supply side, domestic alumina operating capacity stands at approximately 99.4 million tonnes per year. No news of production cuts or maintenance has surfaced recently, and capacity has effectively reached a near-term peak, with several new commissioning and retrofit projects still advancing on schedule.

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In particular, a major refinery in Shanxi has moved close to full output at roughly 2.2 million tonnes per year with short-term operating stability steadily improving, while a greenfield unit in Beihai, Guangxi remains on track to begin trial feeding within this month or in early Q4, carrying around 2 million tonnes per year of new capacity. A second greenfield project in Baise, Guangxi has its Phase II works all but wrapped up at roughly 1 million tonnes per year, and exact start-up timelines across all sites will continue to be tracked.

As of Thursday September 2, 2026, the national alumina capacity utilisation rate came in at 82.40 per cent edging up 0.13 per cent from the prior week. Based on Mysteel's cost model and a Guinean bauxite quote of USD 70 per tonne, the industry-wide weighted average full cash cost works out to roughly RMB 2,654.3 per tonne.

At current price levels, close to half of total domestic capacity has already been running below full cost, and a portion of units have even slipped into negative cash-flow territory. With the cost floor showing no sign of giving way and spot quotes grinding lower, the loss pool has kept widening. A number of inland and coastal high-cost producers have begun signalling an intent to throttle back output, with any actual supply response to be monitored going forward.

On the inventory side, domestic alumina traders' stocks printed 6.661 million tonnes for the last week, a build of 54,000 tonnes week-on-week. Cargoes that had earlier been repositioned across regions have now cleared the ports and were delivered to consuming smelters, shifting some volume out of port warehouses and into in-transit and downstream yard stocks. Under the prevailing north-south spread, cross-regional shipment has picked up. As the spot-futures basis has widened, basis traders have turned more active in sourcing physical material, nudging warehouse stocks and in-transit holdings modestly higher.

In terms of downstream offtake, Mysteel's tally puts domestic primary aluminium smelters' alumina consumption at about 1.68 million tonnes last week, little changed from the week before. Aluminium capacity is holding around 45.42 million tonnes per year with the operating pace broadly steady. And given that most smelters have been sitting on comfortable raw-material buffers, only minimal just-in-time restocking has been observed.

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On balance, the near-term tape is getting some tactical support from positioning and headline noise, but the domestic supply-demand setup is not about to turn meaningfully, and with stocks still accumulating the spot market is expected to stay offered, leaving the price envelope at RMB 2,550–2,650 per tonne.

Note: This news is published under a content and exchange agreement with Mysteel