Spot alumina price resists rise after high Nalco tender

The spot alumina market may have peaked after the National Aluminium Co tender, which fetched $405 per tonne fob Vizag, as consumers resist higher prices, traders said.

Spot material remained at $350-370 per tonne fob on March 7, with no new business reported to MB since the result of the 25,000-tonne tender, which took prices above $400 for the first time since August.

"My Chinese customers just aren't excited; they're not interested at the moment. I'm a bit worried," one trader told MB on the sidelines of MB's 13th Bauxite and Alumina Conference following the tender.

The trader was concerned by forecasts made by the Chalco general manager of alumina and aluminium, Zhao Lanying, at the conference that Chinese imports of alumina will shrink to 3-4 million tonnes this year, compared with almost 7 million tonnes in 2006.

"Look at the Chalco presentation. It's not good for business," the trader said.

The tender, announced on March 6, was the centre of much speculation among delegates at the conference — prior to the result, Nalco sources told MB they would be disappointed if the price came in below $400 and trader estimates had ranged between $400 and $500.

The auction was won by Visa and met market expectations, with the more bullish traders claiming that uncertainty in Guinea will sustain prices at higher levels. The price was up from Nalco's last auction in early February which went for $393 per tonne fob Vizag.

"$405 was close to expectations," Simon Storesund, senior vp sourcing and trading at Norsk Hydro, told MB on the sidelines of the conference.

On the morning before the result was announced, analysts had forecast the tender would fetch more than $400 per tonne: Stephen Coakley, senior consultant at Hatch, had pegged it at $425 per tonne, while Julian Kettle, manager of aluminium research at Brook Hunt, and Nikhil Shah, senior consultant at CRU, had been more conservative, forecasting that it would be above $400 per tonne.

But while many will try to use the tender as a benchmark, others cautioned that prices may have peaked for the year given the surplus of material. Zhao Lanying's prediction comes as China seeks to cut alumina imports and become more self-sufficient.
"The consensus seems to be that this is close to the peak of this year. There has been a slight over-correction to the upside," said Storesund.

The jump in prices since the start of the year has been attributed to strong demand from China and the two strikes in Guinea, the world's largest bauxite exporter.

With the strike now over and its impact on supply minimal, focus could return to the production surplus which is forecast to weigh on prices this year and last until 2010, market participants said.

But traders predicted that prices will remain firm, while consumers and producers remain uneasy about the uncertain peace that now reigns in Guinea, following the recent agreement between the president and the west African country's trade unions.