Alumina Ltd CEO forecasts alumina surplus of around 0.5 mt in China in next three years

Michael Peter Ferraro, Alumina Limited - MD, CEO & Executive Director forecasts a modest surplus of alumina during the remaining months of 2019. He also forecasts on the Chinese alumina supply/demand balance over the next few years. He sees small alumina surpluses of around 0.5 million tonnes or less in each of the next 3 years. He said this during H1 earning presentation of Alumina Ltd. The company reported about 20 million bauxite production and 6.2 million tonnes of alumina production in H1 2019. It sticks to a full year production guidance of 12.6 million tonnes of alumina for 2019.

Over H1 2019, the alumina price ranged between US$418 and US$321 per tonne, and AWAC's realized price averaged US$375. The alumina market headed from a balance in H1 2019 to a small surplus outside of China towards the end of it and the beginning of Q3. According to him, the surplus was primarily driven by slow growth in aluminium production and higher alumina production due to the resumption of Alunorte, the start-up of Al Taweelah in the UAE and the ramp-up of Fria in Guinea.

In China, higher alumina production and lower aluminium demand led to a price drop for alumina.  About 2.5 million tonnes of alumina capacity per annum were curtailed since July because of lower prices. Alumina growth exceeded aluminium production in China as well as rest of the world.  He also projected that China will return to being a net alumina importer as the domestic price is likely to pick up. The restart of new alumina refining and smelting projects will be influenced by Chinese government’s supply-side reforms, as Beijing is going strict on its measures to fight pollution. This will compel bauxite mines and alumina refineries to comply with higher environmental standards leading to higher costs. Further capacity curtailment is also expected.

According to him about 15 inland refineries are now using imported bauxite to mix with domestic bauxite.  Domestic bauxite prices have increased due to environmental cuts and restrictions. This will potentially drive up alumina production costs and provide support for Chinese alumina prices. China imported 54 million tonnes of bauxite over the first half of 2019 compared with nearly 83 million tonnes over the whole of 2018.

He expects growth in global demand of between 1% and 2% over the course of 2019 despite a drop in demand in China. Alumina Limited’s short-term outlook is subdued due to lower LME prices and higher alumina production. However, the company remains positive on the long-term outlook for alumina and aluminium and it hopes to remain profitable on the back of its low cost production.

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