Uncertainty Remains in The Supply From The Mining End, And The Long-term Price Of Alumina May Fluctuate.

In the past month, the futures price of alumina first rebounded rapidly to around 3,270 yuan per ton, reaching a new high since April this year, driven by the support of the spot market and the policy on bauxite in Guinea. However, as market sentiment eased and domestic mines resumed production, the price quickly dropped back to around 3,000 yuan per ton. Currently, the supply of bauxite is abundant in the short term but has potential risks in the medium term. The prices of the near-month 2506 and 2507 contracts are expected to fluctuate within a range.

Mine supply: Abundant in the short term, but with hidden dangers in the medium term.

The domestic supply of bauxite in China is divided into two parts: domestic production and imports. Among them, the volume of imported bauxite has been increasing year by year in recent years. Data shows that in 2024, the domestic production of bauxite was 93 million tons, while imports supplemented 158.767 million tons, with a total supply of nearly 252 million tons. The proportion of imported bauxite reached 63.1%.

According to the data of domestic bauxite production this year, in April, the output of domestic bauxite was 5.44 million tons, increasing by 3.03% year-on-year and decreasing by 5.39% month-on-month. From January to April, the cumulative output was 22.4 million tons, increasing by 7.64% year-on-year, approximately 1.6 million tons. As for the data of imported bauxite this year, in April, the import volume was 20.684 million tons, increasing by 45.44% year-on-year and 25.67% month-on-month. From January to April, the cumulative import volume was 67.7011 million tons, increasing by 34.2% year-on-year, approximately 17.25 million tons.

From the weekly port shipment volumes of Australia and Guinea, as of May 30th, the weekly port shipment volume of Australia has declined, but the absolute value is still within the normal historical range; the weekly port shipment volume of Guinea has continued to rebound restoratively and is currently at a historically medium to upper level. Additionally, Indonesia banned bauxite exports in the first half of 2023, but there were port shipment activities for two consecutive weeks in the middle and late May this year. The subsequent shipment locations and sustainability need to be closely watched, which may become an important supplement to domestic bauxite supply.

According to domestic bauxite inventory data, as of May 30th, the inventory of bauxite at domestic ports was 26.1546 million tons, which has been continuously increasing since the beginning of this year; the inventory of imported sea-drifted bauxite was 15.6453 million tons, within the normal range since the beginning of this year.

From the domestic bauxite demand data, the average monthly domestic bauxite demand was around 5.9 million tons from January to April, and the average monthly imported bauxite demand was around 11.9 million tons, totaling approximately 17.8 million tons. The above data can confirm that in the short term, domestic bauxite supply is abundant. However, from a seasonal perspective, the import volume of bauxite will decline significantly from September to November each year, mainly due to the heavy impact of the rainy season in Guinea. At the same time, due to the stricter management of mining area licenses by the Guinean government in the first half of May, the probability of the Axis mine being shut down is relatively high. Therefore, it is expected that there will still be hidden dangers in the supply of imported bauxite in the medium term.

Production capacity and output: Profit improvement, resumption of production begins.

Since May, as operating capacity bottomed out, inventories were reduced and the impact of policy expectations in Guinea eased, market pessimism has abated, and futures and spot prices have rebounded rapidly to around 3,270 yuan per ton. Industry average profits have also been restored. As of May 30, the industry's average profit was 439.1 yuan per ton, the industry's cash cost was 2,624.9 yuan per ton, and the industry's full production cost was 2,839.9 yuan per ton. Domestic weekly operating capacity has recovered to 84.6 million tons, weekly output has recovered to 1.665 million tons, and the weekly inventory reduction rate has slowed down.

Warehouse receipts position: Warehouse receipts decreased, position remained stable.

According to the warehouse receipt data, the number of warehouse receipts has been continuously declining. It was 27.86 tons on April 30 and 12.82 tons on May 30. Currently, the domestic spot price of alumina is around 3,300 yuan per ton, while the price of the near-month 2506 contract of alumina futures is 3,090 yuan per ton. The term structure of the variety shows a standard Back structure. It is expected that the number of warehouse receipts will continue to decline in the coming period. The alumina futures price is not very attractive to industrial short hedging funds, and the decline in the spot price of alumina needs to wait for the further release of resumed production capacity. From the data of open interest, the open interest of the 2509 contract of alumina futures increased first and then decreased along with the market, but it is still at a relatively high level, indicating that the long-short battle of the 2509 contract of alumina futures may not be over yet.

At present, the domestic demand for alumina is relatively stable, and the points of contention between bulls and bears all stem from the supply side. In the short term, the supply of bauxite is normal, and there is even a surplus. The weekly shipment volumes from Guinea and Australia are normal, and the inventory of imported sea-borne alumina is also normal. The port inventory of bauxite is at a high level this year. The profit of alumina has recovered to a considerable state, and the weekly operating capacity and output have bottomed out and rebounded. Domestic alumina is still in the process of de-stocking, but the de-stocking speed has slowed down. The spot price maintains a high premium, and the futures term structure shows a standard Back structure. It is expected that the prices of the near-month 2506 and 2507 contracts will present a pattern with a ceiling and a floor, that is, the resumption of production will exert pressure, while the rise in spot prices and de-stocking will provide support. The bottom is expected to be within the range of April's fluctuations.

In the medium term, there are still risks in the supply from the mining end. The reasons are that the seasonal rainy season in Guinea and the policies in the mining areas have obvious impacts, and the latter is more uncertain. Therefore, it is expected that the probability of the main 2509 contract and the 2510 contract going up is greater.

In the long term, it is expected that the policy impact on the mining end in Guinea will not last long and will eventually return to normal. Therefore, with an abundant supply of raw materials at the mining end, the long-term price of domestic alumina will fluctuate around the cost.

From: China Nonferrous Metals Industry News

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