China exporting alumina again amid soaring prices
Contracts for over 140,000 tons signed in July: consultancy
China is shipping unusually high volumes of alumina for a second time this year to an international market desperate for the ingredient used to make aluminum, traders and analysts said, even as domestic prices rise and put pressure on smelters.
Contracts to export over 140,000 tons of alumina from China were signed in July amid a favorable price arbitrage, according to consultancy CRU. That’s almost three times as much as was exported in all of last year, customs data shows.
China, the world’s top aluminum producer, has rarely exported significant volumes of alumina. That changed in April when US sanctions on Rusal compounded an outage at Norsk Hydro’s Alunorte plant in Brazil, deepening a global shortage of the white powder.
International alumina prices are up 37 percent year-to-date to just under $560 a ton, making Chinese exports profitable even though spot alumina prices in the smelting heartland of eastern China have surged by 20 percent from end-June to 3,300 yuan ($480.07) a ton.
“The price differential between the rest-of-the-world market and the Chinese market is significant,” said a Europebased alumina trader, whose usual business of shipping alumina into China has been turned on its head.
The arbitrage shut after an initial wave of Chinese exports in May and June, but it is wide open again, with alumina cargoes heading to Europe, Africa and other parts of Asia, he said.
High alumina prices have been a boon for China Hongqiao Group, whose revenues for the material increased almost fivefold year-on-year in the first half of 2018. Australian duo South32 Ltd and Alumina Ltd are also cashing in.
Smelters without their own alumina refineries, however, are suffering from high input costs, and the situation could worsen, industry sources warned, especially if a strike at Alcoa Corp’s operations in Western Australia starts to affect output.
China is also set to repeat 30 percent output curbs on alumina in 28 cities this winter, further tightening supply, while more stringent 50 percent cuts on carbon anode production are another concern.
“So costs are exploding [and] many smelters [globally] are losing money,” said an analyst at a hedge fund.
“Most importantly, and hardly anyone talks about it, there is a real risk that Rusal sanctions will not be lifted any time soon, definitively not before the [US mid-term] November election.”