Under the dominance of negative factors, the futures of alumina have been fluctuating and weakening recently, with the main contract price hovering around 2,750 yuan per ton.
SMM data shows that China's bauxite output in September was 4.8821 million tons, a year-on-year decline of 2.32%. Due to the continuous impact of the rainy season, bauxite mining activities in Shanxi, Henan and other places have not yet resumed. The short-term expectation of resumption of production is weak. Domestic ore inventories in the two places continue to be reduced, and the overall supply is tight. However, due to the fact that the absolute inventory of domestic bauxite remains at a high level, coupled with the shrinking profits of alumina plants and the abundant overseas supply, it is expected that the overall price of domestic bauxite will remain stable. Subsequently, as the rainy season in many inland areas comes to an end and mining conditions improve, the supply of domestic ore is expected to rebound significantly.
In terms of imported ore, since the beginning of this year, China's bauxite imports have remained at a high level, thanks to a significant increase in bauxite imports from Guinea. In September, China's bauxite imports stood at 15.8806 million tons, a decrease of 13.17% month-on-month but still an increase of 38.26% year-on-year. Guinea continued to hold the position of the largest source of imports. In that month, it imported 10.4926 million tons of bauxite from the country, a decrease of 14.87% compared with the previous month and an increase of 58.23% compared with the same period last year.
The rainy season in Guinea usually lasts from May to October, with July to September being the peak period of rainfall, which has a significant impact on the shipment of bauxite. According to SMM data, as of October 10th, the weekly bauxite outflow from Guinea's major ports was 2.6683 million tons, a decrease of 405,800 tons compared to the previous week. On the basis of the month-on-month decline in imports in September, it is expected that the month-on-month decline in imports in October will still be relatively significant.
Overseas output of alumina has risen
According to SMM data, China's output of metallurgical grade alumina in September this year was 7.6037 million tons, increasing by 1.52% month-on-month and 10% year-on-year. In terms of production capacity, according to Aladdin's research and statistics, as of October 17th, the national built capacity of alumina was 114.62 million tons, and the operating capacity was 97.15 million tons, a decrease of 1.4 million tons compared with the previous week. Although the operating capacity in Shanxi region has been reduced by about 400,000 tons due to the rainy season, the overall market still faces the pressure of oversupply. Last week, the national alumina operating rate slightly dropped to 84.8%. Meanwhile, as the spot price of alumina weakened, industry profits have continued to narrow since August. Against this backdrop, some enterprises in the north have taken measures to reduce production. However, as the average cost of the industry is still lower than the average price of the network, enterprises still have some profit margins. Coupled with the support of long-term order delivery demands, the overall domestic maintenance scale is temporarily limited.
In terms of inventory, the accumulation process of domestic alumina that began at the end of May is still ongoing. According to Mysteel's statistics, as of October 10th, the total domestic inventory of alumina has reached 4.639 million tons, an increase of 63,000 tons per week and 721,000 tons year-on-year.
In 2024, the trade structure of alumina in China continued to shift from net imports to net exports, and the overall trend of net exports has persisted since the beginning of this year. In September, the import volume of alumina was 59,998 tons, a decrease of 36.43% compared with the previous month, but still an increase of 61.68% year-on-year. The export volume was 246,420 tons, representing a month-on-month increase of 36.52% and a year-on-year growth of 82.26%.
Recently, the overseas output of alumina has been continuously rising, which has led to a significant drop in spot prices and thus kept the domestic import window open since the beginning of September. As of October 16th, the FOB price of alumina in Western Australia was $323 per ton, a 15% drop from the July peak. There is still profit margin in imports. As of October 20th, the profit from domestic alumina imports was 79.8 yuan per ton. From the perspective of import sources, the import pattern of alumina in China is gradually diversifying. Besides the traditional source Australia, it has further expanded to many countries such as Indonesia, Vietnam and India.
Domestic electrolytic aluminum production remains at a high level
According to SMM statistics, domestic electrolytic aluminum output in September was 3.6148 million tons, increasing by 1.14% year-on-year but decreasing by 3.18% month-on-month. In September, which is the traditional peak season, the proportion of molten aluminum in domestic electrolytic aluminum plants increased by 1.2 percentage points month-on-month to 76.3%. The ingot output decreased by 8.67% year-on-year to approximately 857,000 tons.
In terms of production capacity, as of the end of September, the built domestic electrolytic aluminum production capacity was 45.84 million tons, and the operating capacity was 44.06 million tons. Both the operating capacity and the industry's operating rate saw a slight increase on a month-on-month basis, mainly due to the second-phase cross-provincial replacement project from Shandong to Yunnan, as well as the successive commissioning and capacity recovery of the previous technological transformation projects in Guangxi. Entering October, it is expected that the commissioning and resumption of production of the replacement projects and technological transformation projects will continue to boost the output of electrolytic aluminum.
The proportion of molten aluminum shows regional differences: Some enterprises in the south have reported that the willingness of downstream aluminum bar enterprises to accept goods has weakened, and the external sales of molten aluminum have decreased. Some northern enterprises have reported an increase in their direct sales plans for molten aluminum and a rise in the proportion of molten aluminum. Overall, it is expected that the proportion of molten aluminum will rise by 1 percentage point to 77.3%.
The price of alumina will fluctuate and bottom out
On the macro level, the current domestic economy maintains a stable and progressive development trend. With the further implementation of policies, it is expected that the endogenous resilience of the economy will continue to increase. Overseas, the market holds extremely high expectations for the Federal Reserve to continue cutting interest rates in October. According to CME's "FedWatch" tool, the probability of the Federal Reserve cutting interest rates by 25 basis points at the October interest rate meeting is 99%. It is worth noting that the September CPI data to be released by the United States this Friday will provide a crucial basis for the subsequent decisions of the Federal Reserve.
Fundamentally, on the raw material side: Domestic bauxite port inventories have been continuously rising, mainly due to the stable replenishment of Australian imported ore sources and the limited actual disturbance to bauxite shipments caused by the rainy season in Guinea, which have jointly driven the price center of bauxite to shift downward. The domestic bauxite market shows regional differentiation, but supported by the overall balance of supply and demand, the price remains mainly stable. On the supply side, due to the high operation of domestic alumina production and the continuous opening of the import window, the pressure of oversupply has become increasingly obvious. At present, some high-cost enterprises are approaching the break-even line. After occasional production cuts in October, large-scale production cuts may start in November. On the demand side, the inventory of alumina raw materials in electrolytic aluminum plants is relatively high, and their enthusiasm for spot purchasing is low. They mostly adopt strategies of price reduction and purchasing based on demand.
Overall, before the large-scale reduction in alumina production, the oversupply pattern is difficult to reverse. It is expected that the alumina futures will mainly experience a volatile bottoming-out trend in the later period, with the support level for the main contract at 2,700 yuan per ton as a reference.
