Alumina price is at its lowest level in China since 2009

Can the alumina price recover in the next six months? This is the question Credit Suisse asks. If China's aluminium smelters ramp up as planned then the shortfall in alumina should peak in the December quarter and push up the price, attracting imports. On the other hand, the broker suspects aluminium smelters need to curtail output by 2.4mtpa this year, bringing forward the peak to the current quarter when prices are falling. If smelter reductions are forthcoming the broker finds little reason for alumina to recover.

The alumina price is at its lowest level since 2009. The fall reflects imbalances in the speed of the ramp-up in aluminium smelters and alumina refineries. In the first half of this year China faced a glut in alumina which drove down prices.

Alumina refineries have ramped up faster than aluminium smelters. Looking forward, aluminium smelter curtailments in China are a major near-term risk. China has a heavy aluminium surplus and will have to curtail smelting as exporting the surplus is no long economic. With smelter output being curtailed and alumina demand dropping a recovery is unlikely. Given prices are still heading lower, Credit Suisse cannot find any support for upside to alumina prices over the next six months.

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