Alumina prices face downward pressure in 2020: Platts survey

China's alumina market participants expect prices to fall in 2020 due to overcapacity at home and abroad and import volumes to continue rising as seaborne prices remain lower than domestic levels, the Alumina Outlook Survey by S&P Global Platts has found.

Close to 67% of participants saw alumina imports rising this year in anticipation of seaborne prices remaining lower than Chinese domestic prices. No one surveyed expected alumina imports would fall in 2020.

Some 57% of participants expected alumina prices to average Yuan 2,400-2,800/mt in 2020. Breaking down the numbers further, 64% thought the upper end of alumina prices would be Yuan 2,800/mt and 50% saw the lower end at Yuan 2,400/mt.

Others thought prices would be Yuan 200-300/mt lower than these levels, with some noting it depended on whether there were any alumina production cuts in the year due to environmental curbs.

Chinese domestic ex-works alumina prices averaged Yuan 2,671/mt ($383/mt) in 2019, according to Platts assessments -- $33/mt higher than the seaborne price average of $350/mt in the year.

Just under half of the participants thought China's environmental protection policy would impact alumina production in 2020, though some said the impact would be limited.

"Environmental protection has become the 'new norm'; alumina smelters are used to it and have upgraded their facilities over the past three years or so," a source at a Chinese aluminum company said.

Some participants expected alumina production to increase this year despite the environmental protection measures. A smaller number of participants thought alumina production could be reduced for environmental reasons in view of the red sludge generated during production.

Meanwhile, bauxite ore exploration in China will also be impacted by the stricter environmental protection measures. As a result, some 47% of respondents thought China's bauxite imports would continue to rise this year, while 27% expected they would be similar to 2019.

Bauxite ore supply has been relatively tight in China's Shanxi and Henan provinces where open cast mines face resource exhaustion and lower grades. Underground mining has also become harder due to more stringent environmental protection measures.

China's bauxite ore imports totaled 91.8 million mt over January-November, up 21.9% year on year, according to China Customs data.

China's primary aluminum consumption saw the first negative growth in three decades in 2019 but a stronger performance in the auto and property sectors could help boost aluminum consumption this year.

However, new aluminum capacity and weaker alumina prices are likely to weigh on China's primary aluminum price in 2020.