Singapore — China's alumina prices are expected to strengthen in the third quarter on rising demand due to primary aluminum smelters lifting production or starting up new operations, according to S&P Global Platts' Alumina & Primary Aluminum Outlook for Q3.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Most market participants surveyed expected domestic alumina prices to increase from current levels to average Yuan 2,300-2,400/mt ($326-$340/mt) in the July-September quarter. A small number said prices could reach Yuan 2,600/mt.
Some 80% of respondents expected China's domestic alumina demand to rise in Q3, and 70% saw alumina production increasing in the quarter. This was in stark contrast to the coronavirus-impacted Q2 Outlook, when 60% of respondents saw China's alumina output falling.
Only 30% of participants expected China's demand for seaborne alumina would increase in Q3, while 40% were unsure.
"Alumina imports will depend on prices as domestic alumina supply is able to meet demand," a Chinese smelter said.
"Considering the cost advantage of imported alumina, I think Chinese smelters will import more alumina. Even though the overseas market will see some restarts in the second half of this year, producers will still sell to China," a trader based in China said.
Some 87% of respondents estimated that China's primary aluminum output would rise in Q3, incentivized by high profit margins, according to the Outlook.
"Chinese smelters are building new capacity and lifting operating rates with profit margins close to Yuan 2,000/mt at present," an analyst in northern China said.
China's primary aluminum capacity was expected to climb over the second half of 2020 in response to healthy profit margins. This will boost demand for alumina and support alumina prices, companies said.
About 53% of respondents did not expect the primary aluminum import arbitrage window to stay open in Q3. Seaborne prices are expected to rise as operations are restored in other key markets due to the easing of lockdown measures.
"It's hard to see the import arbitrage window staying open unless there is a significant increase in domestic prices. However, new capacity being commissioned will bring on more supply and restrain the rapid increase in domestic prices," an analyst in central China-based said.
Platts spoke to 30 companies for the Outlook in the third week of June, comprising Chinese and international producers, smelters, traders and analysts.