China domestic alumina prices remain low on weak ingot market

China's domestic alumina prices remained low this week on the back of a continued high supply and a weak ingot market, local sources said Wednesday. Domestic non-Chalco alumina prices were indicated at Yuan 3,100-3,300/mt ($453-482), narrowing from Yuan 3,200-3,300/mt two weeks ago. Chalco's spot offer remained at Yuan 3,200/mt. "Prices are staying low because of rising supply and weak ingot prices. The recent export tax imposed on aluminium alloys have put a lot of pressure on primary metal in the domestic market as well, so ingot prices have fallen further," a source from producer Coalmine Aluminium said. "We are still quoting Yuan 3,100-3,200/mt now, but we have heard some offers are lower around Yuan 3,000/mt. We've not heard anything below Yuan 3,000/mt," the source added. A source from major producer Weiqiao Aluminium said they were still offering around Yuan 3,300/mt currently as costs remained high for them at around Yuan 3,200/mt. A Beijing Antaike analyst said most deals were done between Yuan 3,100-3,200/mt in general. MARKET EXPECTS CONTINUED PRESSURE ON ALUMINA, INGOT PRICES In the short term, sources agreed that ingot prices were likely to fall further which will continue to pressure alumina prices, though alumina may find support after recent market talk from Shandong producers suggesting cutbacks. "Ingot prices are still expected to get lower, mainly due to continued weak demand and the impact from the new aluminum alloy export tax. We expect ingot prices to range between Yuan 17,000-18,500/mt for the rest of the year," the analyst said. "Ingot prices are unlikely to fall below Yuan 17,000/mt as costs remain high, in terms of power, oil, transport etc. This can put further pressure on alumina prices ... but if Shandong producers such as Weiqiao and Chiping Aluminium are really cutting production, then alumina prices should be able to hold above Yuan 3,000/mt in the near term," he added. An official from Yunnan Aluminium smelter said: "There's a lot of market talk about Weiqiao cutting output, ranging from 10% to 50% ... We expect they will cut about 20-30% at most." He added: "Production costs are high for both alumina producers and ingot smelters, if the alumina cutbacks are true, that should have some support for prices. As for ingots, if prices fall below Yuan 17,000/mt, we may see some smelters cutting back or shutting down, so that will support ingot prices above Yuan 17,000/mt." The Weiqiao Aluminium source told Platts Wednesday the company has reduced alumina production by up to 50% in August on the back of weak domestic prices. Weiqiao has a capacity to produce about 4 million mt/year of alumina and had in earlier 2008 aimed to produce about 3 million mt this year. The source said it was uncertain when the company will resume normal production and how much output will be affected overall. "We will have to wait and see ... so far the cutbacks have had no impact on prices yet," he said. SPOT IMPORT ALUMINA HEARD SOFTER AT $410-420/MT CIF Meanwhile, sources said spot import trade for alumina was lacking. "There's still very little import trade at the moment, but we heard prices are now around $410-420/mt CIF China," the Antaike analyst said. "Import prices have probably lowered on the back of weak domestic prices, but even if domestic alumina prices fall further in the near term, we doubt import prices can drop below $400/mt CIF as world supply is also limited," he added. Spot import prices were indicated at about $420-440/mt two weeks ago. A Chinese trader said: "Domestic alumina supply is abundant and prices are weak, so there is little incentive to import. Suppliers from overseas are also unwilling to sell at the levels that are competitve with Chinese domestic prices as world spot supply is also tight." He added: "The recent tender prices from India's Nalco have all closed above $400/mt FOB and that is a good indication that prices delivered to China should stay above $400/mt in the short term." Source: Platts