By Amy Lv and Pratima Desai
BEIJING/LONDON (Reuters) – New capability for changing bauxite into alumina due on-line subsequent yr is ready to ease tight provides and doubtlessly halt a record-breaking worth rally of the fabric used to make aluminium.
Greater alumina costs outdoors China have turned the highest producer and shopper right into a internet exporter this yr from a internet importer and boosted costs of aluminium, which is used within the transportation, building and packaging industries.
Disruptions in provides of bauxite from Guinea and Brazil and output suspensions in Australia contributed to a 70% surge in alumina costs this yr to a file 5,645 yuan ($779.77) per metric ton on the Shanghai Futures Alternate. Aluminium costs are up round 7% this yr.
“There does not appear to be an finish to this tightness of alumina, not instantly,” mentioned Eivind Kallevik, CEO at Norwegian aluminium producer Hydro.
“New alumina refineries anticipated to begin up in Indonesia and India will add extra tons to the market.”
International alumina provides final yr totalled 140 million metric tons, in response to the U.S. Geological Survey, unchanged from the earlier yr.
Extra provide is within the pipeline.
In China, greater than 13 million tons of latest capability is because of come on-line subsequent yr, in response to data supplier Shanghai Metals Market (SMM).
In India, Vedanta (NYSE:) plans to put money into a plant with annual capability for six million tons of alumina by 2026. In Guinea, an arm of Emirates International Aluminium plans to construct a 2 million tons-a-year alumina refinery, slated to open in September 2026.
And in Indonesia, two state firms plan to double capability at their refinery in West Kalimantan province to 2 million tons however haven’t specified a timeline.
In the meantime, elevated alumina costs and better revenue margins are anticipated to additional incentivise use of China’s capability, including to produce. China’s alumina capability of 102.7 million tons is being utilised at a charge of 83.6%, SMM mentioned.
“Alumina (OTC:) producers have proven sturdy willingness to take care of a excessive working charge this yr spurred by good-looking revenue margins,” analysts at China’s state-backed analysis home Antaike mentioned.
“However manufacturing is perhaps affected if heavy air pollution this winter lasts a very long time, exacerbating tight provide.”
LOOMING SURPLUS
China’s January-September alumina exports rose 33% from the identical interval final yr to 123.57 million tons, fetching a median worth of $541 a ton, about 10% greater than the worth on the Shanghai alternate over the identical interval.
Some analysts, seeing a looming oversupply, forecast decrease alumina costs for 2025. UBS predicts a median worth of three,600 yuan a ton in 2025, whereas Antaike pegs it at 4,000 yuan a ton.
“We count on China’s alumina market to step right into a provide glut from February and the worth will slide in consequence,” mentioned Sharon Ding, head of China primary supplies at UBS.
In China, SMM expects the market to swing to a surplus of 960,000 tons in 2025 from a deficit of 235,000 tons this yr, whereas globally UBS expects a surplus of 890,000 tons in 2025 following a scarcity of 920,000 tons in 2024.
Surpluses in 2025 are more likely to be greater if demand progress slows due to a government-mandated cap of 45.5 million tons of aluminium manufacturing.
SPOOKED BY DISRUPTIONS
This yr’s alumina deficits are resulting from a number of elements.
U.S. aluminium producer Alcoa (NYSE:) closed its Australian Kwinana refinery, with annual capability of two.19 million tons, within the second quarter.
In Might, Rio Tinto (NYSE:) declared pressure majeure on alumina from its refineries in Queensland, Australia. Its Yarwun refinery can produce 3 million tons of alumina yearly. It didn’t reply to a Reuters request for an replace.
“Some huge sources of alumina have been misplaced this yr together with from Rio Tinto, which is not anticipated to be again at regular manufacturing till someday early subsequent yr,” mentioned Liberum analyst Tom Value.
Final week, Alcoa halted bauxite shipments from Juruti Port in Brazil resulting from a stranded vessel, including to nervousness in a market already spooked by export disruptions from Guinea.
Flooding in Guinea earlier this yr restricted bauxite shipments, which once more had been disrupted by customs suspending exports by Guinea Alumina Company (GAC), a subsidiary of Emirates International Aluminium (EGA).
($1 = 7.2393 renminbi)
