New alumina supplies in 2025 poised to rupture record price rally
Bauxite supply disruptions in Guinea, Brazil fuel alumina price
New capacity in China, Indonesia, India set to ease tightness
UBS, Antaike, forecast lower alumina price in 2025
By Amy Lv and Pratima Desai
BEIJING/LONDON, Nov 15 (Reuters) -New capacity for converting bauxite into alumina due online next year is set to ease tight supplies and potentially halt a record-breaking price rally of the material used to make aluminium.
Higher alumina prices outside China have turned the top producer and consumer into a net exporter this year from a net importer and boosted prices of aluminium, which is used in the transportation, construction and packaging industries.
Disruptions in supplies of bauxite from Guinea and Brazil and output suspensions in Australia contributed to a 70% surge in alumina prices SAOc1 this year to a record 5,645 yuan ($779.77) per metric ton on the Shanghai Futures Exchange. Aluminium CMAL3 prices are up around 7% this year.
"There doesn't seem to be an end to this tightness of alumina, not immediately," said Eivind Kallevik, CEO at Norwegian aluminium producer Hydro.
"New alumina refineries expected to start up in Indonesia and India will add more tons to the market."
Global alumina supplies last year totalled 140 million metric tons, according to the U.S. Geological Survey, unchanged from the previous year.
More supply is in the pipeline.
In China, more than 13 million tons of new capacity is due to come online next year, according to information provider Shanghai Metals Market (SMM).
In India, Vedanta VDAN.NS plans to invest in a plant with annual capacity for 6 million tons of alumina by 2026. In Guinea, an arm of Emirates Global Aluminium plans to build a 2 million tons-a-year alumina refinery, slated to open in September 2026.
And in Indonesia, two state companies plan to double capacity at their refinery in West Kalimantan province to 2 million tons but have not specified a timeline.
Meanwhile, elevated alumina prices and higher profit margins are expected to further incentivise use of China's capacity, adding to supply. China's alumina capacity of 102.7 million tons is being utilised at a rate of 83.6%, SMM said.
"Alumina producers have shown strong willingness to maintain a high operating rate this year spurred by handsome profit margins," analysts at China's state-backed research house Antaike said.
"But production might be affected if heavy pollution this winter lasts a long time, exacerbating tight supply."
LOOMING SURPLUS
China's January-September alumina exports rose 33% from the same period last year to 123.57 million tons, fetching an average price of $541 a ton, about 10% more than the price on the Shanghai exchange over the same period.
Some analysts, seeing a looming oversupply, forecast lower alumina prices for 2025. UBS predicts an average price of 3,600 yuan a ton in 2025, while Antaike pegs it at 4,000 yuan a ton.
"We expect China's alumina market to step into a supply glut from February and the price will slide as a result," said Sharon Ding, head of China basic materials at UBS.
In China, SMM expects the market to swing to a surplus of 960,000 tons in 2025 from a deficit of 235,000 tons this year, while globally UBS expects a surplus of 890,000 tons in 2025 following a shortage of 920,000 tons in 2024.
Surpluses in 2025 are likely to be higher if demand growth slows because of a government-mandated cap of 45.5 million tons of aluminium production.
SPOOKED BY DISRUPTIONS
This year's alumina deficits are due to multiple factors.
U.S. aluminium producer Alcoa AA.N closed its Australian Kwinana refinery, with annual capacity of 2.19 million tons, in the second quarter.
In May, Rio Tinto RIO.AX declared force majeure on alumina from its refineries in Queensland, Australia. Its Yarwun refinery can produce 3 million tons of alumina annually. It did not respond to a Reuters request for an update.
"Some big sources of alumina have been lost this year including from Rio Tinto, which isn't expected to be back at normal production until sometime early next year," said Liberum analyst Tom Price.
Last week, Alcoa halted bauxite shipments from Juruti Port in Brazil due to a stranded vessel, adding to nervousness in a market already spooked by export disruptions from Guinea.
Flooding in Guinea earlier this year limited bauxite shipments, which again were disrupted by customs suspending exports by Guinea Alumina Corporation (GAC), a subsidiary of Emirates Global Aluminium (EGA).
($1 = 7.2393 Chinese yuan renminbi)
China has become a net alumina exporter from April https://tmsnrt.rs/3CrgsoL
Alumina prices staged record-breaking rally https://tmsnrt.rs/3AlantE
Newly added alumina production capacity in and outside China over 2024-2026 https://tmsnrt.rs/4hE3tAa
China's alumina output versus consumption over 2019-2026 https://tmsnrt.rs/3AjHttX
Global alumina supply versus demand over 2020-2026 https://tmsnrt.rs/3Ce8e3o
Reporting by Amy Lv in Beijing and Pratima Desai in London; Additional reporting by Neha Arora and Bernadette Christina; Editing by Sonali Paul
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
