Alumina prices are expected to be supported by production cuts in the second quarter
According to foreign reports on April 22nd, market participants have indicated that against the backdrop of ongoing production cuts at smelters, the global alumina market is expected to be supported by a decrease in production in the second quarter, while the latest sanctions imposed by the United States and the United Kingdom on Russian aluminum could disrupt potential trade flows.
Although the FOB price of Australian alumina soared from late December to early January, fluctuating within the range of approximately $360 per ton in the first quarter, the Kwinana alumina refinery in Western Australia plans to implement comprehensive production cuts starting from the second quarter, leading to an increase in spot prices since April.
In mid-April, the main focus of the market was on the production cut plan of the Kwinana alumina refinery.
The largest aluminum producer in the United States, Alcoa Corporation, announced that it would reduce the production of one of its three alumina refineries in Western Australia as it begins to consider cost-cutting measures. Alcoa plans to reduce the scale of its Kwinana alumina plant (with a designed capacity of 2.2 million tons) in the second quarter of this year and plans to shut it down completely in September.
Since January 2023 (before the planned production cut), the operating rate of the plant has been approximately 80%.
The market has begun to digest the impact of production cuts on shipments and deliveries from this refinery.
As a result, market participants will closely monitor whether Alcoa will increase its purchases of third-party alumina from non-Australian sources to supply its own aluminum smelters, as some of the supply contracts the company previously signed with customers may only specify the delivery of Australian alumina. Due to the production cuts, the supply of Australian alumina may be relatively tight.
In addition, the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME) have banned new Russian aluminum from entering their warehouses since April 13th. With more details emerging, it is expected that the global aluminum market will remain vigilant. As participants grapple with complex trade flows against the backdrop of the Russia-Ukraine conflict, this ban will be the primary topic of recent market discussions.
