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China Alumina & Aluminum Outlook: Alumina demand, output tipped to rise in Q4

Highlights

About 86% of respondents see China's alumina demand rising

Views mixed on Q4 alumina prices

Aluminum smelter capacity could weigh on prices

Singapore — China's alumina demand and output are expected to increase in the fourth quarter of this year, but new production capacity coming online is likely to weigh on domestic prices, according to S&P Global Platts' China Alumina & Aluminum Outlook for Q4 2020.

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A huge 86% of market participants canvassed for the Outlook expected alumina demand to increase in Q4 as China's industrial activity strengthens, with only 4% tipping it to fall.

Some 81% believed China's alumina production would rise in the October-December quarter.

Stronger demand is likely to present an opportunity for imported alumina, with 48% saying imports would increase and only 9% thinking it would decrease.

Views on alumina price expectations were mixed with 38% expecting they would increase in Q4 and 29% believing they would fall.

Most market participants expected domestic alumina prices in Q4 to be in the Yuan 2,300-2,400/mt ($337-$352/mt) range, supported by solid demand and production costs. A small number said the low end could be Yuan 2,200/mt and the high end could reach as much as Yuan 2,600/mt.

A majority expected Chinese primary aluminum prices to stay above or around Yuan 14,000/mt in Q4. A few said the low end could be Yuan 13,000/mt and the high end could reach Yuan 15,000/mt.

Chinese smelters have been quickly restoring primary aluminum capacity that was closed earlier this year, and also putting new projects into operation to take advantage of high profit margins.

Given this scenario, 71% of respondents estimated that the rising primary aluminum capacity would start to weigh on Chinese domestic prices.

Around 52% said the import arbitrage opportunity would remain open in Q4, while 19% thought it would close. Some noted the gap would start to narrow in view of rising domestic supply and a recovery in the seaborne market.

Platts spoke to 22 companies for the Outlook, comprised of producers, aluminum smelters, and domestic and international trading houses.