Facing Industry "Dilemma", China Alumina to Meet Challenges

According to the news on January 15 in Melbourne, China alumina manufacturers have already started to cut the production, because the price of aluminum remains low that makes them have to reduce China's aluminum production.

Global prices of aluminum fell to low point in November 2015, because its major producer - China increased the exports. The price of alumina has dropped a third since September last year. According to the current price of alumina, many alumina refineries in China are not profitable. Domestic alumina refining industry is facing a “Dilemma”.

Four fifths of Chinese alumina refineries are in negative cash flow condition, so they begin to cut the production. Domestic refiners have stopped the production capacity of 9.1 million tons/year. According to the calculation, someone forecast that the reduction of China alumina might be about 19% of the total capacity of alumina.

Although such a large reduction may help to limit the amount of aluminum production, but it is unclear whether the reduction of alumina refineries are based on the total production capacity or the current 60 million tons of production capacity of alumina. But from January to October last year, the output of China alumina was just about 47.3 million tons or so.

A alumina trader from an international trade company in Singapore thinks that once the price goes up, refiners may resume the production.

The trader says that China's spot alumina prices are down from 2200-2400 RMB in September to 1600 RMB per ton or so. China aluminum prices fell below 10000 RMB per ton in November, which is the lowest point for more than ten years. The current price is about 10700 RMB per ton.

Due to tight cash flow, aluminum producers reduce daily storage of alumina, which leads to the excess supply of alumina on the supply chain, and forces refiners to cut the production. Most reduction of production are concentrated smelters in Shandong.

Since the beginning of 2015, China's aluminum smelters has shut down more than 4.5 million tons/year of production capacity.

Last year, China supplied large amount of aluminum materials in the global market, which makes a record, but also exacerbates the global oversupply situation. But this year, the "Winter" will be a big challenge for China's alumina industry.