The price of Alumina has surged to a two-years peak, prompting active expansion of Alumina Industry in China

Source: Wall Street News Official

The price of Alumina(Aluminum Oxide) has reached its highest level in these two years, leading to an increase in production by China's alumina industry. This surge in global alumina prices has prompted Chinese producers to actively expand their production capacity and seize the market opportunity.

According to the latest data from SMM International, on June 13th 2024, Alumina prices in Western Australia soared to $510 per ton, marking a new high since March 2022. The year-on-year increase has exceeded 40% due to supply disruptions earlier this year.

This significant price hike has stimulated enthusiasm for production within China's alumina(Al2O3) industry. Monte Zhang, managing director of AZ Global Consulting, revealed that new projects are scheduled for production in Shandong, Chongqing, Inner Mongolia and Guangxi during the second half of this year. Additionally, Indonesia and India are also actively increasing their production capacities and may face oversupply challenges over the next 18 months.

Over the past year, supply disruptions in both China and Australia have significantly driven up market prices. For instance, Alcoa Corp announced the closure of its Kwinana alumina refinery with an annual capacity of 2.2 million tons back in January. In May,Rio Tinto declared force majeure on cargoes from its Queensland-based alumina refinery due to a natural gas shortage.This legal declaration signifies that contractual obligations cannot be fulfilled due to uncontrollable circumstances.

These events not only caused Alumina(Alumine) prices on the London Metal Exchange (LME)to reach a 23-month high but also increased manufacturing costs for aluminum within China.

However, as supply gradually recovers, the tight supply situation in the market is expected to ease. Colin Hamilton, director of commodities research at BMO Capital Markets, anticipates that alumina prices will decrease and approach production costs, falling within a range of over $300 per ton. Ross Strachan, an analyst at CRU Group, concurs with this view and mentions in an email that unless there are further disruptions in supply, the previous sharp price increases should come to an end. He expects prices to decline significantly later this year when alumina production resumes.