Since mid-August, the futures price of alumina has been continuously weakening. There were signs of stabilization in late October, but it then weakened again. The main negative factors are the loose supply and the increase in inventory.
The supply of bauxite is relatively loose
In October, according to relevant data, the national bauxite output was 4.7723 million tons, a slight decrease of 2.2% month-on-month and 6.9% year-on-year. From January to October, the cumulative output of bauxite was 50.5155 million tons, increasing by 5.2% year-on-year. At present, enterprises in Shanxi and Henan regions that were previously affected by environmental protection policies and the rainy season have met the conditions for resumption of production. The specific time for resumption of production awaits approval from the government. As of last Thursday, the bauxite inventory of the alumina plant was 52.45 million tons, slightly decreasing compared with the previous period, but it remained at a high level overall, and the willingness to replenish inventories was relatively weak. Domestic bauxite prices remained stable in October, while imported prices slightly declined. The CIF price of 45%Al and 3%Si bauxite from Guinea at major ports in Shandong dropped to 72 US dollars per dry ton.
On the import side, China imported 15.88 million tons of bauxite in September, a decrease of 13.2% compared with the previous month. Due to the influence of the rainy season in Guinea, it increased by 38.1% year-on-year. From January to September, the cumulative imports reached 157.305 million tons, an increase of nearly 32% year-on-year, with imports from Guinea accounting for 75%. The impact of the rainy season in Guinea has basically come to an end, and the shipment volume of bauxite has rebounded. This will be reflected in China's import data for November. In the short term, no significant disruption incidents occurred at the overseas mining end, and the overall supply of imported ore was relatively loose. As of last weekend, the domestic bauxite port inventory was 27.3584 million tons, a decrease of 359,300 tons compared with the previous week.
Expectations for enterprises to cut production are heating up
Relevant data shows that in October, the output of metallurgical grade alumina in China was 7.7853 million tons, increasing by 2.4% month-on-month and 6.8% year-on-year. From January to October, the cumulative output was 74.458 million tons, representing a year-on-year increase of 8.1%. The average daily output in October slightly declined, due to the constraints of routine maintenance by some enterprises in the north and the tight supply of domestic ore, as well as the decline in smelting load in the south. After July, the domestic alumina production capacity has remained stable, and no new capacity has been put into operation in recent months. As of last Thursday, the total built capacity of metallurgical grade alumina across the country reached 110.32 million tons per year, with an operating capacity of 90.657 million tons per year. The weekly operating rate slightly decreased by 0.24 percentage points compared with the previous week to 82.18%. The operating rate in Guangxi region slightly declined, and the overall operating capacity remained at a high level.
According to the current operating capacity of alumina, the demand for downstream electrolytic aluminum is relatively sufficient, and the overall supply and demand pattern of alumina is in a loose state. The price of alumina has approached the industry's average cost line. As industry profits have been compressed, expectations for alumina enterprises to cut production have risen, and support from both the cost and supply sides may strengthen.
With the growth of alumina production and the increase in spot supply, domestic inventories have been on the rise since August. As of last week, the total inventory of alumina on the Shanghai Futures Exchange reached 248,000 tons, and the warehouse receipt volume was 237,000 tons, which was at a relatively high level. The latest data shows that the total domestic inventory of alumina is 4.732 million tons and is still on the rise. The inventory of alumina in electrolytic aluminum plants is 3.269 million tons, and their raw material reserves are relatively sufficient.
The output of electrolytic aluminum will decline in November
From the perspective of downstream electrolytic aluminum, relevant data shows that China's electrolytic aluminum output in October was 3.7421 million tons, an increase of 3.5% month-on-month and 1.1% year-on-year. From January to October, the cumulative output was 36.506 million tons, representing a year-on-year growth of 1.9%. Entering November, environmental protection factors may affect the resumption of work for some enterprises. It is expected that the output of electrolytic aluminum will decline to 3.62 million tons.
In October, the operating capacity of electrolytic aluminum remained the same as that in September, at 44.06 million tons. The capacity utilization rate of enterprises was 96.1%, and it has basically remained at a high level of around 96% since April. Against the backdrop of a decline in the price of alumina at the raw material end while the price of electrolytic aluminum remains high, the profit situation of electrolytic aluminum enterprises is good, with the spot theoretical profit exceeding 4,000 yuan per ton for several consecutive months. However, due to the limitation of the "ceiling" of production capacity, the space for increasing the operating capacity and output of electrolytic aluminum is relatively limited. From a long-term perspective, there is a possibility of profit recovery in the industrial chain. The strong price of electrolytic aluminum may provide some support for the price of alumina.
Overall, the supply and demand pattern of alumina remains loose, and inventories still stay at a high level. The price of alumina is under significant pressure, but the cost line below provides strong support, and the space for further decline is limited. Therefore, in the short term, the futures price of alumina may mainly fluctuate at a low level. Pay attention to changes in market sentiment.
