China's aluminum production soars, tightening alumina market amid power relief in Yunnan
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Update time : 2024-07-04 17:01:15
China's primary aluminum production is approaching last year's record highs as previously idle capacity ramps up in Yunnan province. In May, production increased by 5% year-on-year to 3.65 million metric tons, nearing an annualized output of 43.0 million tons.
The resurgence in primary aluminum production has tightened the market for alumina, the intermediate product refined from bauxite. Chinese spot prices for alumina are trading near their highest levels since late 2021, supporting metal prices. Improved rainfall in Yunnan, which greatly relies on hydroelectricity, has alleviated power shortages, allowing the restart of around 1.15 million tons of capacity previously shut down last November.
Yunnan has become a major production hub, with smelters relocating from coal-rich provinces to reduce carbon footprints. The province now hosts almost six million tons of annual smelter capacity. This year, local production has surged due to better rainfall, reversing the sharp drop in November.
However, domestic alumina supply has struggled to keep up with demand from the smelter restarts. National production of alumina rose by just 3.4% in the first five months, compared to a 5.4% increase in primary metal production.
China has increased alumina imports to balance the market, with inbound shipments totaling 1.15 million tons in January-May, up 60% from last year. However, exports to Russia have also surged, with producers supplying 610,000 tons this year.
Analysts expect alumina prices to peak in the third quarter as supply catches up with demand. However, the aluminum market's growing dependence on imported bauxite presents a new vulnerability for China, potentially driving price volatility.
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