MONTHLY: China's alumina surplus to persist in December

On the supply side, large-scale reductions among domestic alumina refiners have not occurred. Some producers briefly trimmed output in November for routine maintenance and in response to weakening profit margins and local government efforts to reduce atmospheric pollution, the report observed. However, these temporary and small-scale curtailments had only a marginal impact on overall production.

Mysteel's monthly survey showed that the 44 alumina refiners regularly tracked produced 7.84 million tonnes of metallurgical-grade alumina in last month. Although this was 1.6% lower from October, it represented an 11.7% increase compared with the same month last year.

Looking to this month, those producers that have already signed long-term supply contracts with smelters for the year will remain cautious about cutting production, despite sustained pressure from low alumina prices throughout November which squeezed profit margins. Last month the average profit among the same 44 surveyed producers slumped by 42.1% on month to Yuan 86.2/tonne ($12.2/t), according to Mysteel's survey.

Still, many refiners were maintaining relatively high run-rates early this month. During the November 28–December 4 week for example, the average capacity utilization rate among the 44 producers edged up by 0.14 percentage points from the prior week to 86.2%, the survey findings showed.

On the demand side, alumina demand from primary aluminum smelters has remained stable in recent months and is expected to stay broadly flat in December, the report said.

Holding sufficient inventories of the raw material and enjoying solid profit margins in November, the smelters' leverage in purchase negotiations has strengthened, prompting them to defer restocking or procure only at more favorable prices in the near term.

The persistent imbalance between steady demand and ample supply has led more alumina to flow into the domestic spot market, resulting in a further buildup in inventories. Mysteel's survey found that as of December 4, total alumina inventories across the 10 major Chinese ports, 44 producers, 89 smelters, and at rail yards or in transit had climbed for the 27th straight week to reach 5 million tonnes, the highest level since the survey was launched in January 2022.

With oversupply lingering, alumina prices are projected to remain under pressure in December. Mysteel assessed the weighted monthly average spot price for smelter-grade alumina with a purity above 98.6% at Yuan 2,851/t in November, down 2.2% from October.

In addition, support for alumina prices from the cost side also weakened last month. The increased availability of imported Guinean bauxite, China's primary feedstock for alumina refining, has driven ore prices lower. Mysteel's price assessment showed that the average price for seaborne bauxite (containing 45% Al₂O₃ and 3% SiO₂) from Guinea fell by 1.3% on month to $71.7/t CIF Rizhao in November.

Shipments of bauxite from Guinea to China are expected to increase further this month, as several mines that were previously shut down in the West African country will likely resume operations, adding more bauxite supplies to the Chinese market and lending less support to alumina prices, the report suggested. 

Written by Iris Pang, pangjunyu@mysteel.com