Unconsciously, alumina has reached a new high again! Despite the significant fluctuations in the stock and futures markets, alumina has forged its own path, steadily pushing prices higher. What kind of miracles can alumina perform after reaching new heights?

What are the reasons for the sharp rise in alumina prices?

Throughout September, spot prices of alumina in various regions have been steadily rising, with overall weak supply and strong demand. On the demand side, downstream aluminum smelters maintain low inventory levels, and aluminum factories actively replenish their stocks before the peak season. On the supply side, frequent maintenance of alumina production has limited capacity expansion.

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Maintaining net exports throughout the year further tightens supply!

In terms of alumina imports and exports, in August 2024, alumina net exports reached 137,000 tons, maintaining an import deficit. Imports decreased from 70,700 tons to 6,300 tons, while exports slightly declined from 146,700 tons to 143,300 tons. In the first eight months, the total net imports of alumina were 161,300 tons, a year-on-year decrease of 45.59%. China's alumina will maintain net exports throughout the year, and imports will further tighten the domestic supply of alumina. Subsequent observations will be needed regarding the resumption of production at Rio Tinto's Australian alumina plant and the impact of the red mud reservoir overflow in India on its original capacity.

Social inventory, factory inventory, and delivery inventory all decline!

In terms of inventory, alumina's total social inventory in September decreased by 54,000 tons to 3.963 million tons. Due to recent difficulties in executing long-term contracts, the circulation of spot goods is also tight. Downstream aluminum smelters have to consume raw material inventory to maintain production, leading to a continued decline in raw material inventory at aluminum factories. Additionally, as the demand for restocking before the long holiday increases, the willingness of aluminum factories to inquire and purchase has significantly improved recently, resulting in a noticeable decrease in social inventory. In terms of the inventory of the Shanghai Futures Exchange, as of September 30, the alumina warehouse receipt slightly declined in September. The warehouse receipt of the Shanghai Futures Exchange decreased by 9,000 tons to 89,100 tons, and the futures inventory of the Shanghai Futures Exchange decreased by 39,200 tons to 93,200 tons.

A long-term solution cannot quench an immediate thirst!

In terms of raw materials, there has been no further progress in the resumption of production of domestic mines in Shanxi and Henan; for imported mines, Guinea's ore project is gradually being put into production. However, the peak of the rainy season from July to September has affected ore shipment, and the port arrival volume in September has shifted lower than before. It is expected that after the rainy season, the arrival volume will return to high levels. In addition, there are reports that Indonesia may relax the export ban on bauxite, but specific policy changes still need to be observed, and the overall export quota may be limited, with the earliest exports expected in the fourth quarter. Overall, the short-term shortage of ore is expected to continue, but the long-term expectation for bauxite is to continue to ease.On the supply side, in August 2024, the output of alumina was 7.001 million tons, a year-on-year decrease of 0.38%, and a month-on-month decrease of 1.3%. The cumulative output for the first eight months was 53.98 million tons, an increase of 0.73% compared to the same period last year. Looking ahead to the second half of the year, high profits have stimulated alumina smelters to actively resume production and start-up, and it is expected that the supply of alumina will gradually become more abundant. However, long-term high-load production has led to frequent production cuts and maintenance at alumina plants, making it difficult for alumina capacity to rise significantly in the short term. Coupled with the potential for production restrictions during the winter heating season and start-up plans, the inflection point for a significant easing of alumina supply may occur in the first quarter of next year.

Demand remains stable, with hard demand still present!

On the demand side, in August 2024, the operating capacity of electrolytic aluminum was 43.4833 million tons, an increase of 120,000 tons from the previous month. In terms of the utilization rate, the utilization rate of electrolytic aluminum in August increased by 0.27% month-on-month to 96.01%. According to Mysteel statistics, the increase in operating capacity was mainly contributed by the Inner Mongolia and Henan regions. Currently, the overall change on the supply side is minimal, with production growth slowing down and other regions maintaining relatively stable operations. Entering September, it is expected that a certain aluminum company in Guizhou, China, will resume production with a capacity of 133,000 tons in September, followed by the resumption of production with a remaining capacity of 125,000 tons in Sichuan and 200,000 tons in Xinjiang. Additionally, there will be a start-up of a 100,000-ton technical transformation project in Guizhou and a 100,000-ton technical transformation project in the Qinghai region.

What kind of miracles can alumina perform after reaching new highs?

Overall, on the raw material side, there has been no further progress in the resumption of domestic bauxite production in the short term, and the arrival of imported ore in September has shifted lower compared to the previous period, with ore still being in short supply in the short term, but the long-term ore supply is expected to become more abundant. On the supply side, high profits have stimulated alumina smelters to actively resume production and start-up, but long-term high-load production has led to frequent production cuts and maintenance at alumina plants, making it difficult for capacity to rise significantly in the short term. Combined with the impact of production restrictions during the winter heating season and start-up plans, the inflection point for a significant easing of alumina supply may occur in the first quarter of next year. On the demand side, the utilization rate of electrolytic aluminum has been steadily increasing, with low inventory levels in the short term driving downstream active restocking, and the impact of the dry season on the electrolytic aluminum capacity in Yunnan needs to be tracked in the fourth quarter.

In terms of strategy, the current peak season restocking demand from downstream has driven further scarcity of circulating spot goods. Overseas supply disruptions continue, and it is expected that the futures prices of alumina will remain strong in the short term. However, the expectation of a relaxation of ore supply and the resumption of production in the long term limits the upward potential.