China alumina faces bearish Q2 outlook as COVID-19 hits demand: Platts survey

China's alumina prices in the second quarter are expected to suffer from a sharp contraction in domestic and global demand as a result of the coronavirus pandemic, a survey by S&P Global Platts showed.

As a result, primary aluminum prices are expected to be in a range of around Yuan 11,500-13,000/mt ($1,630-1,842/mt) in the April-June quarter, with some survey participants seeing it as low as Yuan 10,000/mt, Platts data showed.

The survey saw 64% of respondents expecting a drop in Chinese domestic alumina prices in Q2, while 92% saw demand for alumina deteriorating in the quarter. Given the weak pricing outlook, 60% of respondents believed China would cut alumina production in the current quarter.

"There's only one word needed to analyze the current market situation, and that's 'decline'," an official from a central China-based smelter said.

"Primary aluminum smelters and alumina producers are struggling with so much market volatility and they are running out of capital. This could see some primary aluminum smelters cut production to some extent," he added.

The Platts survey found that 46% respondents expect domestic alumina prices to stay below seaborne prices, with international logistics impacted by the coronavirus pandemic.

Some respondents said alumina prices may not decline significantly as there were a few signs that aluminum smelters would sharply cut production. Just two survey participants expected prices to bottom out and start to rebound in the second quarter.

Some 59% said primary aluminum smelters would cut production to some extent in view of the current low prices and slow recovery in demand. But they did not expect any large-scale output cuts unless primary aluminum prices continue to hit new lows. Aluminum producers are not able to easily shut down production as it is costly for them to restart the electrolytic tanks.

Most survey participants said new infrastructure investment sanctioned by the Chinese government may help to support market sentiment but it would have limited impact on real consumption. Much of the current infrastructure plans are targeting high-tech and communications sectors, which would have limited impact on boosting aluminum demand.

Majority of aluminum consumption comes from property, vehicle production and power sectors.

Platts spoke to 22 companies for the outlook survey in the first week of April, comprising Chinese and international producers, smelters, traders and analysts.