KEY MESSAGES
ALUMINA
1. Alumina spot prices have fallen to a fresh 25-month low of $311 per mton amid a well supplied market and declining prices in China. As anticipated by HARBOR, Australia alumina spot prices have continued to decline and have reached fresh lows as Hydro’s Alunorte refinery ramps up. Australia alumina spot prices are down 14% m/m and have fallen 56% since April 2018. Prices in China have also fallen and are trading at $340 per mton (ex-works and excluding VAT), down 15% after reaching a nine-month high early in June.
2. Chinese alumina producers are restarting production; ROW’s production is expanding at the fatest annual pace in two years. In China, HARBOR‘s intel suggests that Xinfa Group’s Jiaokou 2.8 million mtpy alumina refinery in Shanxi province has restarted production after being shutdown early in May due to environmental inspections. Additionally, the company’s 3.0 million mtpy refinery in Guangxi also restarted one production line (0.5 million mtpy) on higher bauxite availability in the region. Market reports also suggest most refineries in Shanxi have resumed production after environmental audits during May. Meanwhile, alumina production in the Western World is expanding at the fastest annual pace in two years (up in May 4.8% y/y) driven by higher run-rates in Asia, Middle East, Africa, and Australia.
3. HARBOR expects alumina spot prices to fall further and reach levels as low as $250-$270 per mton at some point in the next 12 months amid a shift to a growing world alumina surplus. Indeed, with the confirmed restart of the Alunorte refinery in Brazil and production expansions in China and the Middle East, the world’s alumina market is expected to switch to a surplus of 2.8 million mton in 2019 after a deficit of 0.4 million mton in 2018.
BAUXITE
1. Chinese demand of imported bauxite to grow as Chinese alumina refineries are converting production lines from high-temperature (HT) to low-temperature (LT) technology in order to process imported bauxite. In Shanxi province, Shanxi Huaxing Aluminium, which will restart 1.0 million mtpy of capacity this month, began trials with different mixes of domestic and imported bauxite. Meanwhile, East Hope Jinzhong Aluminium has done technology upgrades on one of its lines by adding 0.3M mtpy of LT production capacity to an existing HT production line. The company is testing imported bauxite. In Henan province, Chalco Zhongzhou, with a total of 2.4 mtpy alumina production capacity completed HT to LT conversion in the company’s five production lines. The refinery will be using imported bauxite as feedstock. Also, Heung Kong Wanji refinery upgraded a 0.4M mtpy alumina production line (HT to LT) in order to use imported bauxite.