Supply-side disturbances support the rise in the market. Is alumina about to start a counterattack?

2025-05-16 08:23:27 Source: Wenhua Finance

After alumina hit a new low last month, the supply-side maintenance and production cuts gave the market a "boost", and the market stabilized and rebounded. After the May Day holiday, under the joint effect of news and fundamentals, the center of gravity of alumina futures prices continued to move up. Today, the main force stood above the 3,000 mark during the intraday trading, hitting a new high in one and a half months. Has the alumina pattern changed?

News disturbance boosted the rise of alumina prices

The Ministry of Industry and Information Technology, the National Development and Reform Commission, the Ministry of Natural Resources, the Ministry of Ecology and Environment and other ten departments issued the "Implementation Plan for High-quality Development of the Aluminum Industry (2025-2027)", which clearly proposed to promote the adjustment of the aluminum industry structure, and no new electrolytic aluminum and alumina production capacity will be added in key areas for air pollution prevention and control. However, according to an investigation by the Economic Information Daily reporter, in key areas, some companies launched alumina projects in the name of "aluminum hydroxide projects" and "curved" against the wind.

Hebei Wenfeng New Materials Co., Ltd., a subsidiary of Hebei Wenfeng Group, had problems with illegal operations during the approval process of the alumina project. Public information shows that the company's project in Caofeidian Industrial Zone, Tangshan City, was initially approved with an annual output of 4.8 million tons of aluminum hydroxide, but later converted to the production of metallurgical-grade alumina through technical transformation. The decision letter on energy-saving review and non-approval of administrative license issued by the Hebei Provincial Development and Reform Commission on January 10, 2024 clearly stated that the project did not pass the approval of alumina production capacity. However, the environmental protection acceptance monitoring report shows that the project actually built three metallurgical-grade alumina production lines with an annual output of 1.8 million tons, and claimed to have achieved a production capacity of 4.8 million tons. If there is a shutdown, the pressure on spot supply will be relieved in the short term. Affected by the investigation of the plant project, the price of alumina has risen.

Maintenance continues to be maintained, and the staged decline in production supports prices

Since April, due to the continuous expansion of losses in the alumina industry, alumina enterprises in many places have begun to overhaul and reduce production, and the scale of production reduction has expanded, which has temporarily affected alumina production and boosted price rebound. There are still new shutdowns and maintenance after the May Day holiday. It is reported that a large alumina plant in Xiaoyi, Shanxi Province, has stopped production of a production line due to insufficient ore supply, involving a production capacity of 1 million tons/year.

The inventory of alumina warehouse receipts has declined. Overall, the losses of alumina production have continued to expand since April, and the scale of maintenance and production reduction has also expanded accordingly. The short-term supply side changes frequently. Although there was a resumption of production capacity after maintenance in the early stage, there are still maintenance plans within the month. The output has declined in stages, and the impact of news disturbances has led to a significant rebound in the recent market. However, in the long run, the supply and demand pattern of alumina has not changed, and the expectation of new capacity release still exists.

In addition, the reduction in bauxite prices has weakened costs. As the rebound in alumina prices may drive the return of marginal capacity, the future supply may still be in excess. Therefore, the short-term supply continues to tighten, making the alumina futures price prefer short-term fluctuations, but in the long run, the oversupply of alumina may be maintained, and the pressure from above still exists. In the future, attention should be paid to the progress of capacity release, changes in bauxite prices, and demand performance.