China’s winter curtailment imbalances boosts alumina market
November 2017
Alumina prices are at their highest point since 2014, reaching over US$470/t at the end of October. China capacity control and strong prices may generate interest in non-China asset development or sales.

Aluminium Price Range Narrows

AME estimates the average aluminium spot price ex-China was near US$2,161/t (US$0.98/lb) in October, an increase of 2.5% on the September average of US$2,108/t. The price range over the month further tightened, with aluminium price ranging from its opening value of US$2,117/t up to US$2,192/t, and closing at US$2,169/t. In China, the monthly aluminium spot price in October, which includes 17% value-added-tax (VAT), remained similar to September at US$2,424/t (US$1.10/t).

The combined stocks reported on the major exchanges (LME, SHFE and COMEX) increased from 2.37Mt to 2.45Mt at the end of October. Both LME and COMEX inventory fell, whereas SHFE inventory steadily grew to 1.2Mt.  At the end of the month, the LME stocks had reached a new nine-year-low position at 1.19Mt continuing an almost four-year decline. Major LME warehouse locations fell by 10kt in the US, 50kt in Asia and 15kt in Europe. By contrast SHFE stocks grew to 640kt of deliverable stocks and 590kt of warranted stocks—the highest value since 2013.


Alumina and Aluminium Prices to Remain Strong into 2018

The smelter grade alumina price FOB Australia estimate continued to rise. October pricing increased from US$445/t at the beginning of the month to US$479/t, to give a month average of US$461/t—a 23% month on month jump. In China, the alumina spot prices increased by CNY100/t (US$15/t), averaging near CNY3,660/t (US$550/t).

As AME reported in September, the alumina price rapidly surged in September due to the implementation of China’s winter curtailment policy, limiting over 30% of production at all refineries and smelters in the “2+26+3” cities. Market price was further reinforced by smelter companies building alumina inventory to maintain production over the curtailment period for refineries. In October, as most of the major policy-restricted cities released the winter production curtailment plans, the supply and demand balance is becoming clearer, although the final production response is yet to be attained. AME expects both alumina and aluminium prices will stabilise, but remain strong for the remainder of 2017 and into early 2018.