The alumina market is currently experiencing a fascinating interplay of forces, with recent futures performance indicating a downward trend while underlying ore prices and anticipated supply shifts suggest a more complex outlook. Understanding these dynamics is crucial for stakeholders navigating this essential commodity market.
Futures Performance: A Snapshot
Overnight, the most-traded alumina 2509 futures contract opened at 3,061 RMB per tonne. Despite an early high of 3,062 RMB per tonne, the contract closed at 3,001 RMB per tonne, marking a decrease of 59 RMB per tonne, or 1.93%. This decline, alongside open interest standing at 401,000 lots, highlights a recent bearish sentiment in the futures market.
Ore Market Stability and Rising Costs 
In contrast to the futures market, the ore market exhibits relative stability with a slight upward trend. As of May 26, the SMM Import Bauxite Index rose to USD 73.33 per tonne. Other key bauxite prices, such as the SMM Guinea Bauxite CIF average price (USD 74 per tonne) and various Australian bauxite CIF average prices (ranging from USD 65 to USD 70 per tonne), remained unchanged. The notable increase in the SMM Import Bauxite Index suggests a strengthening cost support for alumina, which could influence future pricing.
Industry Updates: A Mixed Bag
Recent industry activities provide further insights. A significant overseas alumina transaction on May 23 saw 30,000 tonnes traded at USD 373 per tonne FOB Indonesia. The SMM Alumina Index, as of May 23, showed a premium of 208.13 RMB per tonne against the latest transaction price of the most-traded contract, indicating a robust spot market.
Warrant reports on May 26 revealed a decrease of 6,599 tonnes in total registered alumina warrants, bringing the total to 150,400 tonnes. This reduction, particularly in Guangxi and Xinjiang, could suggest tighter immediate supply in certain regions.
Global Interplay and Import Dynamics
The global market also plays a significant role. The FOB Western Australia alumina price stood at USD 370 per tonne, with an ocean freight rate of USD 21.40 per tonne. When considering the USD/CNY selling rate, this translates to an external selling price at major domestic ports of approximately RMB 3,261 per tonne, which is slightly higher than the domestic alumina price. Notably, the alumina import window remains closed, indicating that domestic demand is largely being met by local supply.
Supply Recovery and Future Outlook
The past week witnessed a rebound in national alumina operating capacity, increasing by 1.09 million tonnes month-on-month. This was largely due to the completion of maintenance at some alumina refineries in south China, offsetting maintenance in north China. Looking ahead, while some new enterprises are expected to undergo maintenance, the overall operating capacity is projected to continue its slight rebound as other enterprises complete maintenance and resume operations.
The increasing bauxite prices, driven by supply-side disruptions, are expected to strengthen cost support for alumina. This, coupled with a short-term fundamental that has not yet shifted to a surplus, suggests continued upward momentum in prices. However, it’s crucial to acknowledge that with the recovery of supply, alumina prices may face resistance to further significant increases. In the short term, spot alumina prices are expected to hold up well, reflecting the current balance of factors at play.
The alumina market is at a critical juncture. While futures contracts show some weakness, the underlying cost structure and anticipated supply recovery paint a nuanced picture. Market participants should closely monitor these evolving dynamics to make informed decisions in the coming weeks.
Source: SMM with additional information added by GlassBalkan
