MONTHLY: Chinese alumina prices to weaken further in Oct

Alumina supply surplus weighed heavily on its prices throughout September. By September 30, the national average price of metallurgical-grade alumina with more than 98.6% purity fell by a marked 6.5% from a month earlier to Yuan 3,010/tonne ($422/t), continuing a downward trend that began on September 2, Mysteel's daily price assessment showed.

Although alumina output saw a slight retreat in the past month, the overall market supply remained at a high level. Total production of smelter-grade alumina among the 44 Chinese producers regularly tracked by Mysteel dropped by 1.7% on month to 7.7 million tonnes in September, while the figure was still 12.7% higher on year and marked the second-highest monthly output since the survey began in January 2017, Mysteel Global noted.

Most alumina producers maintained steady operations in September, supported mainly by the positive, albeit lower, profit margins. Only a few in Guangxi and Hebei temporarily cut output for routine calcinator maintenance, according to the report.

Looking ahead, alumina output is expected to stay largely stable in October, and many producers have maintained normal production during the just-past National Day and Mid-Autumn Festival holiday over October 1-8, the report said.

Persistent oversupply is likely to keep alumina prices under pressure. Mysteel's survey showed that as of October 9, total alumina inventories at 10 major Chinese ports, 44 refiners, 89 smelters, and rail yards under Mysteel's tracking had risen for the 19th straight week to reach 4.6 million tonnes, the highest level in more than two years.

Thinning profit margins among alumina producers have also heightened sales pressure and weakened their bargaining power, which will further weigh on alumina prices.

Moreover, support from the cost side may be limited too. Alumina production costs could decline in the fourth quarter as imported prices of bauxite are forecast to fall amid looser availability following the end of the rainy season in Guinea, China's largest imported bauxite supplier.

Written by Iris Pang, pangjunyu@mysteel.com