China smelters seen cutting term alumina imports in 2012

Chinese aluminium smelters will reduce term imports of alumina even further in 2012 from last year's lower volumes due to cheaper supplies of the raw material at home, industry sources said on Wednesday.

 

 

Top domestic alumina producer, Aluminum Corp of China Limited (Chalco) , has agreed to supply smelters with 1 year-shipments priced at between 16 and 17 percent of the average value of Shanghai aluminium contract prices <0#SAF:>, the sources said.

 

 

Other alumina refineries have followed suit, agreeing to sell the raw material to smelters at even lower prices. Some refiners even allowed buyers to defer payments by up to three months, the sources added.

 

 

In 2011, Chalco priced its alumina to domestic consumers at around 17.5 percent of Shanghai contract prices, and total imports for that year were 56 percent lower.

 

 

"Smelters wanted term imports for 2012 in late last year but now they are not keen to do it after Chalco and other refineries offered attractive terms," a smelter source in the southwestern Guizhou province said.

 

 

"Competition among local producers was more intense than the previous year. Our assessment is that it's due to the supply issue."

 

 

Traders said Chalco's term alumina for 3 year-shipments starting in 2012 was priced at between 16.8 percent and 17.5 percent of Shanghai contract prices.

 

 

Many overseas suppliers offered 2012 Australian alumina at above 16 percent of London Metal Exchange aluminium prices , on a free-on-board basis, compared to the 14.8-15.5 percent smelters paid in 2011.

 

 

That would mean Australian alumina was priced at around $340 per tonne, based on Wednesday's cash LME aluminium prices , which is higher than spot alumina's prices of around $305-$310 a tonne, FOB, traders said.

 

 

"We have not heard that any smelters had signed new term contracts for 2012 and term imports should be down," a trader for an international trading house said.

 

 

A trader at a large smelter in central province of Henan, the biggest aluminium producing province in China, said prices below 15 percent for 2012, FOB, and 13.5-14.5 percent for contracts for 5 years supply would make overseas alumina attractive.

 

 

China is the world's top aluminium producer, and state-backed research firm Antaike has forecast a domestic alumina deficit of 660,000 tonnes in 2012 compared to a deficit of about 330,000 tonnes in 2011.

 

 

Alumina output is expected to rise by at least 11.5 percent on the year to 43.5 million tonnes in 2012, out of China's annual production capacity of 55 million tonnes expected for this year.