Alumina under pressure in China on smelter cuts

Alumina prices in China were down this week as weakening aluminium prices led to depressed raw material demand from smelters.

Alumina was offered at $319 per tonne fob Australia this week, with deals clinched at $317-318 per tonne. The range narrowed from $329-330 per tonne levels seen two weeks ago. 

Chinese port prices for alumina ranged between 2,570-2,600 yuan ($419-424) per tonne fot in Lianyungang, Jiangsu province. Two weeks ago, imported alumina was trading at 2,580-2,590 yuan per tonne in Lianyungang. 

"Buyers are bidding for 2,550-2,560 yuan per tonne. Sellers won't take those numbers as many imported at $340 per tonne, which translates into around 2,660 yuan per tonne fot Lianyungang port," a major trader said. 

Ailing local demand from aluminium smelters was the biggest factor sidelining buyers. 

Production cuts by two major aluminium smelters in south-west China have effectively reduced local alumina appetite. 

"In addition to Aluminium Corporation of China's (Chalco) Guizhou-based smelter and Anshun Huangguoshu Aluminium, others smelters in the province are also slashing production," an analyst said. 

The cuts are largely due to relatively high power tariffs in the region. Power rates are above 0.50 yuan per kwh in Guizhou, above 0.2 yuan per kwh in the rest of the country. 

Production cuts in Guizhou have spread to other provinces, including Jiangsu and Zhejiang, as well, according to market sources. 

In Jiangsu, Xuzhou-based Datun Aluminium is slated to completely halt aluminium smelting by the end of March. The 100,000-tpy smelter halted half its capacity in the second half of last year. It has been mainly using imported alumina. 

In Zhejiang, Jinhua-based Zhejiang Huadong Aluminium recently completely halted its 150,000-tpy aluminium smelter. 

Currency factor 

Alumina imports have also been hit by a depreciating yuan. 

"We don't have any plan to import alumina at the moment and yuan [depreciation] is the key factor. A softer yuan increases costs a lot as alumina is a bulk commodity. We are in a quandary at the moment," a second major trader said. 

Market participants remain bearish towards outlook for alumina demand in the coming weeks. 

"The domestic aluminium prices may fall to as low as 10,000 yuan per tonne and the downside may have formed for alumina as well," the first trader said. 

On the Changjiang Nonferrous Metals market, the spot aluminium price was between 12,890-12,930 yuan per tonne on Monday March 3, compared with 14,040-14,120 yuan per tonne at the end of 2013. 

On the Shanghai Futures Exchange, the May aluminium contract has fallen by 5.3% so far this year, to close at 13,235 yuan per tonne on Monday March 3.