Categories: General Market Commentary
Topics: General Market Commentary

Chinese clamp down expected to support alumina, aluminium price strength

TORONTO (miningweekly.com) – The successful government-led rebalancing of several Chinese industries has supported alumina and aluminium prices globally, however smelter restarts might undermine prices in 2018, a new report by Bank of America Merrill Lynch (BofAML) Global Research has found.

The banking group pointed out on Monday that alumina and aluminium have both rallied in recent months, with alumina – a critical raw material for aluminium smelters recently outperforming finished aluminium, suggesting “idiosyncratic” factors are at play, analysts advised.

“Indeed, capacity utilisation rates at alumina refineries have bottomed globally, led by China. This is a dynamic that has been visible in other industries as well. Steel mills in China are, for instance, on track to achieve an 88% utilisation rate, making the country the healthiest steel market globally. This is remarkable and highlights the success that authorities have had with rebalancing domestic industries,” the global research team has found.

China's alumina producers have faced colossal headwinds on two accounts. Domestic bauxite availability has tightened after the Ministry of Environmental Protection shuttered mines in Shanxi and Henan, two hubs for alumina refineries. Now, angst has risen that mines in Guangxi and Guizhou may also be inspected next.

Further, according to BofAML, the government has also announced a series of winter cuts at alumina refineries, which will, in all likelihood, sustain the domestic market tightness. “Indeed, we expect strong fundamentals to carry over into 2018,” BofAML stated.

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