China alumina imports up on weak prices, bank credit

Chinese aluminium smelters are increasing imports of spot alumina after overseas prices fell more than 10 percent in less than a month and because of more bank credits, smelter officials and traders said on Friday.

Rising imports of alumina mean the world's top producer and consumer of the main material used for primary aluminium production could mop up the surplus on international market, weighing on domestic prices.

The global alumina market showed a surplus of 1 million tonnes in the fourth quarter of last year, mainly due to output cuts at aluminium smelters and investment in alumina refining capacity during the past few years, Michael Widmer, analyst at BNP Paribas said in a note on Thursday.

Aluminum Corp of China Ltd (Chalco) <2600.HK><601600.SS>, the world's third-biggest alumina refiner, is expected to cut its spot prices to 1,850-2,000 yuan a tonne soon from 2,200 yuan, two smelter sources said.

"Some smelters are not buying alumina in the domestic market and are importing because imports are cheap now," a trade manager at a large smelter said.

"Quality of imported alumina is also better."

Some smelters that had benefited from more credits from Chinese banks for imports were also keen to look for alumina, a trader at an international trading house said.

Alumina imports rose 27 percent on the month in February. Imports dropped 11 percent to 4.6 million tonnes in 2008, while domestic output rose 18 percent to 22.8 million tonnes.

India's National Aluminium Co Ltd , a frequent seller of spot alumina on the international market, cancelled a tender for 10,000 tonnes this week after it received bids with the highest at $168.05 per tonne, 12 percent lower than a tender in late February and 14 percent less than another tender a few weeks earlier. [ID:nBOM443733] [ID:nBOM002515]

Smelter officials and traders in China said spot alumina was being offered to Chinese ports at around $220 per tonne, which would be below 1,800 yuan ($263.2) after a 17 percent value-added tax. Buyers were asking for $210 or below.

Imported alumina already in Chinese ports traded at about 1,850-1,900 yuan a tonne.

Spot alumina was being offered by non-Chalco refineries at around 1,800 yuan, versus 1,800-1,900 yuan in mid-January and more than 2,600 in the fourth quarter of last year and more than 4,000 in the first quarter, according to smelter officials.

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