Australian Alumina Weighed Down by Slack Global Demand, Low China Prices

The Platts Australian alumina daily assessment slipped 50 cents/mt on Friday to $233.50/mt FOB, weighed down by slack global demand, and significantly lower prices in the Chinese domestic market, in import parity terms.

In the last week, buyers' ceiling in China has been at $230/mt FOB Australia, with the lower end of the scale as low as $220/mt. Australian alumina was more than $30/mt and Yuan 200/mt above material from China's Shanxi province, in import parity terms. The premium was unreasonably high in a market with a global surplus, and few desperate buyers, Chinese participants have said for some time.

More global refining cuts would be needed to materially strengthen the price of alumina, producer, consumer and trade sources said this week. In recent weeks there have been uncommitted cargoes of Australian, Brazilian, Jamaican and US origins. Silos in the Middle East appear to be full, and access to affordable bauxite has led India to scale back alumina imports.

The Platts China ex-works Shanxi alumina assessment closed the week Friday at Yuan 1,730/mt ($261) in full cash terms, unchanged from Thursday, but up Yuan 20/mt from last week, and down Yuan 140/mt on the month.

Chinese spot alumina prices have firmed in the past week mainly on the back of recent government environmental protection moves that may impact domestic alumina output and bauxite supply, sources said.

But the upward trend may have reached its end as the recent environmental inspections in Henan province draw to a close and no refinery cuts have resulted as yet, sources added.

Refiners' offers in Shanxi and Henan continued at Yuan 1,750/mt cash on Friday, with tradable levels indicated mostly at Yuan 1,720-1,730/mt, buyers and sellers agreed.

In the near term, however, spot alumina prices are now expected to soften again, and may even slip back below Yuan 1,700/mt unless substantial refinery cutbacks are seen, sources said.

"We need to see at least 1-2 million mt/year of refinery cuts in order to support prices," a Shanxi refiner said.

On Friday, the front-month aluminum contract on the Shanghai Futures Exchange closed at Yuan 12,500/mt, up from Yuan 12,400/mt last week, but down from Yuan 12,790/mt a month ago.