Mumbai, 2 Jul (Commoditiescontrol): China's primary aluminium production is approaching last year's record highs, driven by the reactivation of previously idled capacity in Yunnan province. In May, production rose 5% year-on-year to 3.65 million metric tons, according to the International Aluminium Institute. National output is now close to an annualized 43 million tons, nearly matching the peaks of September and October last year.
The production surge has tightened the alumina market, pushing Chinese spot prices to their highest levels since late 2021. Improved rainfall in Yunnan has alleviated power shortages, enabling the restart of around 1.15 million tons of capacity that was offline since November. As a significant production hub, Yunnan's smelters are now operating at full capacity, benefitting from eased drought conditions that previously caused shutdowns.
Despite a 5.4% increase in national primary metal production in the first five months of the year, alumina output rose only 3.4%, creating a notable supply-demand imbalance. This disparity is reflected in the price performance of the Shanghai Futures Exchange's alumina and aluminium contracts, with alumina prices climbing 15.3% compared to aluminium's 3.5% rise since January.
Environmental inspections and disruptions in overseas supply have further strained China's alumina supply chain. The country has increased alumina imports to balance the market but has also expanded exports to Russia, which faces raw material shortages due to the Ukraine conflict. This has resulted in a relatively small net import of just under 500,000 tons in 2024.
Analysts anticipate that the alumina price squeeze will ease in the coming months as refineries ramp up supply and Yunnan's smelter restarts are completed.
(By Commoditiescontrol Bureau: 09820130172)
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