Are alumina prices up or down

Since this year, the price of most varieties of non-ferrous metals set a new high in nearly a decade, commodity super cycle is constantly hearing, but as a key raw material of electrolytic aluminum - aluminum oxide price obviously did not keep up with the commodity rising cycle.Since 2020, the highest average price of alumina in China was 2,609 yuan/ton in March 2020, while the price of aluminum rebounded 9,000 yuan/ton from the lowest point of the epidemic, a huge increase.In contrast, alumina prices have changed relatively little since last year, and there is a great contrast between the two prices.

Most believe that overcapacity in alumina is responsible for persistently low prices.However, the author analyzes that overcapacity is not entirely the main cause of low alumina price, because there is also long-term idle capacity of alumina, if this part of the capacity is excluded, alumina is not low, therefore, there are still other factors to promote the price of alumina continues to be low.

The supply elasticity of alumina is relatively large

Alumina can not keep up with the price of electrolytic aluminum, the difference between supply and demand elasticity is large.At present, the demand of electrolytic aluminum for alumina is relatively rigid, the cost of electrolytic aluminum tank up and down is too high, so the production must have a stable supply of alumina.Alumina production flexibility is relatively large, production costs are relatively low, which causes the normal situation of alumina must be oversupply.At the same time, the aluminum oxide plant has considerable room for overproduction, which is the extra profit of the aluminum oxide plant operation, and the demand of electrolytic aluminum for aluminum oxide is not able to grow rapidly, resulting in the fact that although both production capacity changes little, the supply of aluminum oxide will soon tend to be loose, which makes it difficult to achieve a sustained increase in the price.

The key to the large supply elasticity of alumina is the stable supply of raw materials. Without the guarantee of raw materials, alumina can not be overproduced.Thanks to The development of Guinea's ore by Chinese companies, a surplus of imported ore has greatly compensated for the decline in domestic supply, despite a very short supply.In addition, since last year, the outbreak has not caused major problems in the supply of ore, and the price of imported ore has remained stable at less than us $50 / ton, and prices have declined to some extent.

According to customs data, China imported about 55.89 million tons of bauxite in 2015, and it almost doubled to about 110 million tons in 2020. Among them, ore from Guinea increased from zero to more than 40 million tons during this period.Over the same period, China's alumina production increased only 24 percent to 73.13 million tons, reflecting the dramatic change in the ore supply structure of domestic alumina production in recent years, according to the National Bureau of Statistics.

However, with the gradual deepening of supply-side structural reform, environmental protection and carbon emission policies, the supply elasticity of alumina will also start to decline.Since this year, the domestic environmental protection requirements are more and more high, part of the alumina production, ore mining is facing production limits, at the same time, heavy pollution weather warning also makes the northern alumina industry production limits, resulting in aluminum oxide plant production instability in winter, especially in domestic mining enterprises, winter mining situation is more severe.In addition, the relocation of alumina to coastal areas faces more stringent site requirements, as evidenced by the concentrated suspension of five alumina projects totaling 25 million tons in Liaoning province in August 2018.In the future, if the regulation of alumina production capacity is strengthened, it is bound to increase the pressure of domestic alumina supply, and the demand for imported alumina will increase.

Alumina has very little capital involvement

The price of electrolytic aluminum rose sharply this year, in addition to its fundamental factors, futures and other speculative capital influx also played an important role in promoting.From the point of view of capital level, the supply and demand pattern of alumina is stable, with little participation of speculative funds.

Electrolytic aluminium industry before the supply side structural reform, because of the rapid expansion of domestic electrolytic aluminium, and associated with excess capacity, alumina demand expansion shrinkage is very frequent, causes the alumina supply and demand environment is not stable, between spot and long single larger arbitrage space, a high proportion of spot trading, attracted a large number of trade finance to enter the market speculation.Such frequent spot trading has led to exceptionally active trading markets, which have also helped fuel price trends.However, with the structural reform of the supply side, the rapid expansion of electrolytic aluminum has been curbed, the demand structure of alumina gradually tends to stabilize, the arbitrage space between alumina spot and long single is weakened, both the supply and demand sides are more inclined to long single transaction, thus squeezing out the space of traders.

In addition, the current alumina industry is facing the pressure of excess capacity, especially the electrolytic aluminum industry gradually enters the stage of capacity "ceiling", the trend of alumina stock competition is more and more intense, making the price in a long-term state of downturn, it is more difficult to attract trade capital into the market.Attracted by the advantages of high grade imported ore, stable supply and low production cost, the domestic alumina construction boom has not cooled down. Currently, the production capacity of alumina is still up to 20 million tons under construction, and several projects will be put into production this year and next year.

Alumina price rise can be sustained

Since May, under the double influence of the sharp rise of alumina production cost and the production cut of some northern alumina enterprises, the alumina price has finally risen, but the increase is much lower than that of electrolytic aluminum, and it seems that it is still difficult for the alumina price to rise significantly and the market is overheated.

According to the analysis, this round of price increase is neither demanddriven increase nor supply-shrinking increase, but cost-supported increase, but the shortage of coal is not enough to long-term pressure on alumina production.On the one hand, there is a lack of strong expectations of supply decline, and the overall loose situation of ore supply has not changed in the short term. Although domestic mines still face a gap from time to time, a considerable part of the capacity has been converted to imported ore production, and the ore supply is relatively stable, so the situation of suspension of production due to lack of ore will not be too large.In addition, the new production capacity, the year of Chongqing Kowloon Wanbo new materials phase I and phase II a total of 1.8 million tons started production.On the other hand, from the point of alumina demand, demand growth in the space is not large, this power brownouts cause electrolytic aluminum production and large area in southwest new capacity years is expected to achieve the quantity of production is lower, electrolytic aluminium most spare capacity has been started in production, the follow-up production space also is not big, so the years start electrolytic aluminium production capacity increased the possibility is not high,More can not push alumina market price rise.