Chinese aluminium prices seen firm and rising in Sept
Chinese domestic aluminum prices are seen fluctuating in a narrow band this month but will basically remain firm as higher production costs are giving support for the light metal’s price, market sources said on September 7.
Mysteel’s national average benchmark price for A00 primary aluminum ingot registered Yuan 14,603/tonne ($2,148/t) including 16% VAT as of September 7, up by Yuan 302/t on month but down by Yuan 216/t on week.
“So far, the price of alumina has been staying around Yuan 14,500/t (and) the high costs of this raw material for producing aluminum make it impossible for the metal’s price to drop too much,” a Jiangxi-based industry source said. Indeed, the firm basis of cost will ensure that the primary aluminum price hovers at current levels or climb even higher in the future, he said.
The domestic alumina price remains buoyed by the supply shortage of alumina internationally and domestic curbs on bauxite operations due to environmental protection activities, as reported.
“The ongoing workers strike on Alcoa’s plant in Australia and operating restrictions on Norsk Hydro’s Alunorte refinery in Brazil sent international alumina prices soaring, which has further boosted the aluminum price. Thus, the domestic alumina and aluminum producers would prefer to shift about 30% of their output to the global market to chase the higher margins available there,” a Shanghai-based market source said.
For example, on September 6 the 3-month aluminum cash price on the London Metal Exchange reached $2,030/t, much higher than the Chinese domestic aluminum price of $1,852/t on that day, excluding the 16% VAT.
On Thursday, workers at Alcoa’s West Australian alumina refinery refused to accept a new labor agreement and voted to continue their strike which has now continued for four weeks and cost the company about 15,000 tonnes in lost alumina output in August. Meanwhile, Norsk Hydro’s Alunorte alumina refinery has been observing 50% capacity cuts since March due to pollution issues. Despite the signing of recent agreements between the Norwegian smelter and the Brazilian authorities, the plant is not expected to resume full production before mid-2019.
On the other hand, downstream demand for aluminum in China remained quite stable in August and market watchers say it will improve further this month. As of September 6, aluminum stocks at 16 major cities in the country regularly monitored by Mysteel thinned by 21,000 tonnes compared to September 3 to reach 1.62 million tonnes, a near one-year low, according to Mysteel’s latest survey.
“Aluminum consumption in China actually enjoys a bright future, especially in emerging markets like new energy vehicles. Also, the recovery of domestic property market will largely contribute to demand for aluminum,” a Singapore-based market watcher said.
Written by Venus Wang, wangyi@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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