Domestic Alumina Prices Entered Downward Path
China’s alumina production stood at 6.12 million mt in February, and the market was in a supply surplus of roughly 265,000 mt. Alumina refineries in Henan maintained their operating rates at merely 54.2% due to thin profits and bauxite shortages. The local operating rates were 55.8% in the same period last year even when the environmental protection policies were stringent. The operating rates in Shanxi stood at 70.7%, and local refineries faced similar issues as those in Henan. Driven by production resumption at Guanglv Group and State Power Investment, the operating rates in Guizhou climbed from 73.2% in February to 89.4% in early March. In Hebei, Wenfeng Alumina’s installed capacity has reached 3.6 million mt, and its operating rate is currently as high as 90.5%. Thanks to stable raw material supply and relatively healthy profits, alumina production in Guangxi and Shandong was the most stable, with operating rates at 98.1% and 95.6% respectively.
To sum up, the current alumina market is filled with bearish factors. Falling caustic soda prices will only temporarily improve alumina refineries’ profits. Against the backdrop of oversupply and diminised cost support, supply shock caused by production resumption and new capacity (Tiandong Jinxin’s 1.2 million mt/year new project) will accelerate the decline in alumina prices across Guangxi, Guizhou and Chongqing. In the short term, alumina prices will remain in a downturn, unless new developments occur that reverse the current oversupply.