Chinese spot alumina prices to remain stable in H2

Domestic spot alumina prices are expected to remain stable for the rest of 2009 with the potential to inch up in the coming months.

At present, the price of alumina from the Aluminum Corporation of China Co Ltd, China's largest alumina producer is CNY 2,300 per tonne while non Chalco alumina sells for around CNY 2,150 per tonne.

Mr Peng GM of Luoyang Xiangjiang Wanji Aluminum Products Co Ltd said "Domestic non Chalco alumina prices, which are representative of the country's spot alumina price, are likely to remain around the current level for the rest of the year. Although new aluminum facilities are expected to come online in the next few months which may push up alumina consumption and prices, the majority of non Chalco alumina producers will probably refrain from sharply lifting prices."

Mr Peng said that the company is turning a profit from selling alumina at current prices and Xiangjiang Wanji Aluminum has no plans to raise alumina prices. Xiangjiang Wanji Aluminum is running at full capacity of 80 million tonnes per annum.

Mr Wang Feihong an industry analyst with China Minmetals Nonferrous Metals Co Ltd noted that any increased demand from the expansion of the country's aluminum production capacity will be negated by expanding alumina production capacity, and thus, spot alumina prices for the rest of the year would remain relatively flat. However, alumina producers that use imported bauxite as a raw material are finding it difficult to remain profitable at current market prices.

One such company is Shandong Weiqiao Aluminum and Power Co Ltd. The company's general manager, surnamed Mr Zhao said that it is still losing money from alumina sales and one quarter of its total 4 million-ton production capacity remains idle. Mr Zhao said "We will consider resuming more production when non-Chalco alumina prices rise above CNY 2,300 per tonne."

According to Mr Lang Dazhan vice director of the aluminum department of the China Nonferrous Metals Industry Association the country's aluminum production capacity will increase from 18 million tons per annum at the end of 2008 to between 20 million tons and 21 million tonnes by the end of 2009. In addition from 2010 onwards, there will be a further 2.60 million tons to 3 million tons of operational production capacity.

Mr Lang said China's alumina production capacity will expand to between 36 million tons and 37 million tons by the end of 2009 from 33.72 million tons at the end of 2008. Another 5.60 million to 6 million tons of capacity will be brought online after 2009.

China produced 4.56 million tonnes of aluminum in the first five months of 2009 down by 16.17% on an annual basis. The average production capacity utilization rate among domestic aluminum smelters was 64.12%. Meanwhile, alumina output reached 8.55 million tonnes in the same period, with an average production capacity utilization rate of 61% among alumina producers.

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