Alumina where to go
October 20 News: The cost rise, improving demand and supply, under the influence of disturbance in the third quarter alumina futures are upward attitude, The futures price once rose to 3203 yuan/ton, after entering September, the alumina futures price opened a wide volatility pattern, after the National Day holiday, the price ups and downs are more obvious, mainly due to changes in the fundamentals, the supply of production is not expected to bring about the strong reality and the weak expectations of long-term easing between the contradiction, in addition, the cost fell to make the alumina below the support weakened. After entering the fourth quarter, what is the performance of supply and demand? How will the alumina futures price be interpreted?
The production of electrolytic aluminum is temporarily stable
In September, the domestic electrolytic aluminum operating capacity increased slightly, mainly due to the continued production of some capacity transfer projects in Yunnan and Guizhou, some enterprises appeared small-scale maintenance, and the capacity of other areas did not change much, however, due to the domestic aluminum water ratio increased month-on-month, resulting in a slight decline in the domestic electrolytic aluminum ingot volume in September, the National Bureau of Statistics released a report showing that, China's primary aluminum (electrolytic aluminum) production in September was 3.58 million tons, up 5.3% year on year. In October, the domestic supply side is not expected to fluctuate, the domestic electrolytic aluminum concentrated resumption of production is basically completed, or no large resumption of production is expected within the year, the current electrolytic aluminum industry is profitable, according to Mysteel research and calculation shows that in September 2023, the weighted average full cost of China's electrolytic aluminum industry is 15,845 yuan/ton, up 81 yuan/ton from the previous month. The increase in aluminum prices was greater than the increase in costs, which led to the increase in the average profit of the electrolytic aluminum industry in September. Under the support of better profits, enterprises mostly hold stable production, and there is no active production reduction in the short term.
In the third quarter of this year, the rainfall in Yunnan has improved significantly, but after the precipitation reached its peak in August, the precipitation in September has declined year-on-year. From the forecast situation in October, the precipitation in Yunnan is still less than usual, and the possibility of dry weather in this year's dry season cannot be ruled out. It is reported that entering the second half of September 2023, the electricity trading price in Yunnan Province has begun to rise significantly. In the second half of the month, the average transaction price has climbed to more than 0.19 yuan. However, better-than-expected water storage in Yunnan may reduce the likelihood of a significant reduction in local production during the dry season. Therefore, from the current production situation of electrolytic aluminum refinery, before the arrival of the dry season, aluminum ingots or will still release a certain amount of incremental, is expected to continue to increase the start of electrolytic aluminum in October, or will drive the alumina market demand slowly increase. After the dry season comes, it is still necessary to pay attention to the influence of power supply in major producing areas on the operation of electrolytic aluminum refineries.
Alumina supply is still tight in the short term but is expected to increase in the long term
From the current mine situation, the domestic bauxite supply is relatively tight, it is reported that the domestic mine has no early resumption of production news, mainly concentrated in Shanxi and Henan, and the rainfall in the northern region has a certain impact on mining, in addition, due to Guizhou environmental inspection, mining reform has not been completed, resulting in tight ore supply. In terms of imports, the impact of Guinea's rainy season on the shipping schedule has reduced the import of ore. In addition, recently, the Australian government has considered including iron ore, bauxite and coking coal and other minerals in its "key minerals list", which has aroused widespread concern, SMM research and analysis, if bauxite is included in the key minerals list of Australia has become an established fact, the stability of China's bauxite imports may cause certain risks. China has imported about 35 million tons of bauxite a year from Australia in recent years, and political risk could cause those imports and prices to fluctuate.
In addition to the tight supply of bauxite, alumina refinery production is also affected by equipment commissioning and maintenance. From the current production situation of the supply side, after the holiday, the domestic alumina refinery production is not smooth, a number of alumina enterprises in the south and north of the country to resume production slowly, alumina enterprises in the southwest of the concentrated roaster overhaul, and Chongzuo an alumina plant affected by the ore tension more difficult to achieve production, the increase in supply after the holiday is significantly lower than expected, aggravate the market can flow spot tension. In addition, after entering the autumn and winter, the northern region may have the possibility of environmental production reduction, although the short stop roasting may have a limited impact on the actual final production, but it will lead to a reduction in phased supply, the spot market is tight, and the price has a short-term boost. However, in view of the overall excess capacity of alumina and fewer restrictions on the resumption of production, long-term supply is still expected to increase, or will limit its upside.
Overall, the cost of alumina has fallen compared with the previous period, and the supply and demand side is in a strong reality and weak expectation pattern, under the influence of this, the volatility of alumina futures is more obvious. Although the short-term demand side of electrolytic aluminum refinery production is stable, the supply side of alumina enterprises to resume production is slow, and the recent basis expansion of the arbitrage demand for the current business has intensified the tension in the spot market, the market price has played a strong support, the spot price may drive the futures price to return to the fundamental trend, the short-term alumina futures below or there is still some support. However, after the arrival of the dry period, electrolytic aluminum plants are still facing the possibility of production cuts, and the long-term supply of alumina is still expected to increase, the supply and demand of alumina may turn loose, and the cost pricing logic may dominate.
