Alumina Supply and Price Outlook

By Amy Lv and Pratima Desai
BEIJING/LONDON (Reuters) – New bauxite conversion capacity due next year may ease tight alumina supplies and halt the ongoing price rally for this essential aluminium ingredient.

Current Market Situation

Higher alumina prices outside China have shifted the nation from a net importer to a net exporter this year, driving up aluminium prices, which are crucial for transportation, construction, and packaging industries.

Supply disruptions from Guinea, Brazil, and output suspensions in Australia have contributed to a 70% surge in alumina prices this year, reaching a record 5,645 yuan ($779.77) per metric ton on the Shanghai Futures Exchange. Aluminium prices have risen around 7% this year.

Eivind Kallevik, CEO of Norway's Hydro, stated, "There doesn't seem to be an end to this tightness of alumina, not immediately." New alumina refineries in Indonesia and India are expected to bolster supply.

Future Capacity Investments

Global alumina supplies last year totaled 140 million metric tons, remaining stable from the previous year. However, upcoming supplies promise more availability:
– China: Over 13 million tons of new capacity slated to begin next year (Shanghai Metals Market).
– India: Vedanta plans a 6 million ton alumina plant by 2026.
– Guinea: Emirates Global Aluminium aims for a 2 million ton refinery by September 2026.
– Indonesia: Two state companies aim to double capacity at their refinery in West Kalimantan.

Market Conditions

Elevated alumina prices and increased profit margins are urging China’s producers to boost output. Their current production capacity is utilized at 83.6% efficiency. However, extreme winter pollution could impact future production levels.

Export Growth

From January to September, China’s alumina exports surged 33% year-over-year, totaling 123.57 million tons, with prices averaging $541 per ton, notably above the Shanghai exchange value.

Price Forecasts

Analysts foresee a looming oversupply which could lead to lower alumina prices in 2025. UBS predicts an average price of 3,600 yuan per ton while Antaike estimates 4,000 yuan. Projections indicate a shift to 960,000 tons surplus in China for 2025, following a 235,000 tons deficit this year.

Supply Disruptions

Factors contributing to the current alumina deficit include:
– Alcoa’s closure of its Kwinana refinery (2.19 million ton capacity).
– Rio Tinto declaring force majeure on alumina from its Queensland refineries.
– Recent challenges in bauxite shipments from Brazil due to vessel issues and Guinea’s export disruption from flooding.

($1 = 7.2393 Chinese yuan renminbi)