Alumina prices in China drop by 7pct since March

Reuters reported that China's alumina prices have fallen 7% since March due to increased supply, prompting merchants to consider exporting the raw material used for primary aluminium production to a steadier international market.

Industry sources said that China, the world's top aluminium producer, was previously the biggest alumina buyer in the international market but it has ramped up its alumina output. Monthly imports dropped to 130,561 tonnes in April from nearly 680,000 at the start of 2010.

Mr Liang Lijuan analyst at COFCO Futures in Beijing said that "Alumina production has kept rising. Traders may be able to do a few export deals. But the local surplus won't grow as big to make China a net exporter."Traders also pointed out that in order to cash in on the shift in price dynamics, merchants will have to overcome significant logistic problems that could keep them from exporting large quantities.

Spot alumina traded at about CNY 2,550 per tonne to CNY 2,650 per tonne this week in China down from about CNY 2,800 in March while international prices have firmed about 3% over the period due to limited availability of spot materials. Spot Australian alumina traded at about USD 410 per tonne to USD 415 per tonne on free on board basis this week. Indian producer Nalco sold 30,000 tonnes at USD 402.80, FOB in March.

Mr Liang said that there is room for a further fall in alumina prices in China. Alumina output hit a record of near 3 million tonnes in April, enough to make around 1.5 million tonnes of metal and able to meet record smelter output of 1.46 million tonnes. Typically, more than 95% of the alumina produced in China is of a metallurgical grade, the remaining alumina output is chemical grade used in abrasives, special glass, catalysts and other applications.

He said that top alumina producer Chalco sells the bulk of its alumina under multi year term contracts and offers spot alumina at CNY 3,000 unchanged from March. Other Chinese refineries dominate spot trade and their production costs were at about CNY 2,100 per tonne to CNY 2,200 per tonne making the current spot prices attractive to them.