Rapid Chinese refinery growth will cap alumina prices

Subject

Global alumina and bauxite markets.

Significance

Alumina prices have eased to around 400 dollars per tonne from a peak of 700 dollars in early 2018. Nonetheless, the price ratio of alumina to aluminium is close to 30%, above the long-term 20% trend. In 2018, the combination of US sanctions targeting Rusal, a Brazilian freeze on production at Norsk Hydro’s Alunorte refinery and an environmental crackdown in Malaysia supported prices. In China, winter pollution curbs in late 2018 were more lenient than expected, enabling traders to fill gaps with exports. Chinese output hit record daily levels in June.

Impacts

• Alumina was removed from the list of import tariffs imposed by the United States, but future policy remains uncertain.
• The introduction of alumina futures contracts on the London and Chicago metal exchanges will help traders manage price risks better.
• Supply forecasts for Brazilian bauxite are in doubt ahead of a likely overhaul of Brazilian regulation after the Brumadinho dam disaster.