China’s alumina prices are expected to remain under pressure for the remainder of November as a persistent supply surplus in the spot market shows little sign of easing, according to Mysteel’s latest report on the key raw material used in primary aluminum production.
The Chinese alumina market has been weighed down by an oversupply stemming from both higher domestic output and increased imports. Mysteel's survey found that total smelter-grade alumina production among the 44 Chinese producers it regularly monitors rose to 7.97 million tonnes in October, up 2.9% from September -- the highest monthly volume since the survey began in January 2017.
Meanwhile, China's imports of alumina climbed as overseas material remained cheaper than domestic supply. Mysteel data showed that the average price of Australian alumina (purity above 98.6%) fell 4.5% on month to $344.4/tonne CIF Lianyungang in October. By comparison, China's weighted national average price for the same grade of domestic alumina dropped 5% to Yuan 2,920/t ($410.2/t), still $65.8/t higher than imported material.
In late October, some temporary production cuts were implemented in North China, where local alumina refiners were ordered to reduce operations due to heavy air pollution. These curbs led to a slight decline in national output in early November, as Mysteel Global reported.
However, the limited reduction failed to ease the overall surplus, and alumina inventories nationwide continued to build. As of November 6, total alumina stocks held by China's 10 major ports, 44 refiners, 89 smelters, and rail yards under Mysteel's tracking reached 4.8 million tonnes -- the highest level in more than three years.
On the demand side, consumption by downstream aluminum smelters has shown little growth in recent months. The capacity utilization rate among the 89 primary aluminum smelters under Mysteel's survey was at 97.5% in October, unchanged from September.
With demand largely unchanged and supply still abundant, Chinese alumina prices continued to soften in early November. Mysteel assessed the national average alumina price at Yuan 2,873/t on November 10, down by 4% on month.
Looking ahead, demand from Chinese aluminum smelters is unlikely to rise significantly during the winter months, as end-user consumption typically weakens during this period. Unless producers make more meaningful production adjustments, the ongoing supply glut is expected to keep Chinese alumina prices subdued in the coming weeks, Mysteel's report suggests.