TRADE REVIEW: Looming oversupply to continue to pressure alumina market

This report is part of the S&P Global Energy Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, metallurgical coal, copper, alumina, cobalt, lithium, nickel and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts to new arbitrages and quality spread fluctuations.

The FOB Australian alumina market is expected to face supply-side headwinds from additional refining capacity in the first quarter of 2026, with limited counterbalancing factors likely to temper the effect on prices.

Expectations of additional volumes, primarily from Indonesia and China's new capacity coming online in Q1, combined with easing cost pressures on the back of softening bauxite prices, have intensified discussions on where alumina prices might bottom out.

While new aluminum smelting capacity is expected to provide some balance to the ex-China market, factors such as a closed Chinese import arbitrage and possible additional supply from potential smelter shutdowns have dampened optimism for Q1.

"Despite planned smelter projects, the substantial forecast growth in alumina supply from Asia and Africa over the medium term suggests that the current surplus will persist, maintaining pressure on prices," said S&P Global Energy and Mining Research analysts, adding, "For 2026, we forecast the surplus to reach 1.2 million metric tons, with prices falling a further 13.3% to average $335/mt."

Platts, part of S&P Global Energy, assessed the FOB Australia alumina price at $308/mt on Jan. 15. It had averaged $315.80/mt in Q4 2025, down 12% quarter over quarter.

Q4 average Chinese domestic alumina prices fell 10% quarter over quarter to Yuan 2,814.14/mt ex-works Shanxi, with the weekly Brazilian alumina premium to Australian material also falling 7% quarter over quarter to $26/mt, according to Platts data.

Alumina, aluminum capacity expansions

Supply-side fundamentals are expected to exert downward pressure on prices in Q1 2026, as incremental capacity from expansions and new refinery projects in Indonesia and China continue to add weight.

The ex-China market anticipates an additional 2 million mt/year of Indonesian alumina capacity in Q1, with half already commissioned in end-December 2025, industry sources said.

Within China, about 3.6 million mt/year of new alumina capacity is slated for commissioning in Q1, with initial output expected between February and March 2026, the sources said.

Some sources said that uncertainty remains following news that Mozal Aluminium will be placed on care and maintenance on or around mid-March 2026, after South32 failed to secure a new electricity supply agreement, as the company had announced on Dec. 16.

South32 has said that its output share from Mozal's FY26 production guidance for the period to March remains unchanged at 240,000 mt, and the alumina previously supplied from South32's Worsley Alumina refinery to Mozal will be redirected to third-party customers under index-linked pricing agreements.

On the demand side, Indonesia's smelting capacity expansions may help absorb part of the alumina surplus. With China's aluminum output approaching its 45 million-mt/year ceiling, production growth is expected to decelerate.

According to industry sources, an Indonesian greenfield aluminum smelter project with a total planned capacity of 1 million mt/year has been commissioned in Q3 2025 and is expected to ramp up to 500,000 mt/year in 2026. A second greenfield smelter project, with a total planned capacity of 1.5 million mt/year, commissioned its 500,000 mt/year Phase I at end-2025, currently operating at around 100,000 mt/year. A third greenfield smelter project, with Phase I capacity of 250,000 mt/year, is scheduled for commissioning in 2026, though exact timelines remain unconfirmed.

While incremental smelting capacity in Indonesia may provide some relief to supply pressure, the market outlook remains bearish as alumina additions are expected to outstrip smelting growth in Q1, Asia-Pacific market sources said.

Softening bauxite prices add pressure

Chinese domestic alumina prices remain pressured as expectations of new refining capacity in Q1 weigh on sentiment, while market participants eye potential production curbs that could stabilize the downtrend in Q1.

The planned commissioning of about 3.6 million mt/year of refining capacity in Guangxi during Q1 has reinforced bearish sentiment for the quarter. Additionally, imported bauxite prices have continued to soften, reducing refinery input costs and creating further downside risk for alumina.

Asia-Pacific market sources said that recent macroeconomic developments, anti-involution initiatives, and the yuan's strength have boosted sentiment and futures performance, creating hedging opportunities that attract higher import volumes into China and easing surplus pressures outside China.

Still, uncertainty persists given surplus fundamentals and limited warehouse capacity in the Chinese market. A trader source cautioned that a futures market breakdown could trigger a sharper correction in spot prices.

On the bauxite front, Chinese import prices continued to face downward pressure on the back of a sluggish alumina market, while expectations of rising Guinean availability from resumed operations further weighed on sentiment.

China-based market sources reported a Q1 term offer from a Guinean bauxite miner at $66.5/dmt CIF China, down $7.5/dmt from Q4. Spot prices continued to edge lower following news of the offer.

Effective Jan. 8, 2026, Platts launched weekly bauxite spot price assessments on a CIF China and FOB Guinea basis.

Platts assessed CIF China spot bauxite at $63/dmt on Jan. 15 for low-temperature ore with 45% alumina and 3% silica. Platts assessed FOB Guinea spot bauxite at $41/dmt on Jan. 15 for low-temperature ore with 45% alumina and 3% silica.

Overall, the alumina market enters Q1 at a critical juncture amid heightened supply pressures, with participants cautious about the risk of prices testing historic lows as supply growth continues to outpace demand.