Everbright Futures: Supply Expectation Disruptions, Has the Aluminum Oxide Started a New Round of Market Trends?

Affected by Guinea’s plan to tighten bauxite production and exports, the market is concerned about changes in the global bauxite and alumina trade pattern. The domestic alumina main contract rose over 3% during trading, hitting 3000 points. Due to global alumina oversupply and increased bauxite supply from Guinea, bauxite prices in Guinea quickly fell, which also pressured the global alumina prices. Additionally, conflicts in the Middle East have altered alumina trade flows, with alumina originally destined for the Middle East being forced to be resold to other regions at low prices. The excessively low prices put dual pressure on Guinea’s sales revenue and tax income, so it is not surprising that Guinea is tightening bauxite supply. Moving forward, attention needs to be paid to the specific details and implementation timeline of production control policies.
From a domestic fundamental perspective, the supply and demand for alumina remains loose. As of March 16, in the spot market, SMM alumina prices have rebounded to 2697 yuan/ton. Domestic alumina manufacturers are substituting inspections for production to cope with loss pressures. Overseas alumina raw materials shipped to the Middle East have been resold at low prices to other regions due to the blockade of the strait, narrowing the price gap and restoring import profits. Increased freight costs at the mining end provide support for alumina, while accelerated warehouse registration combined with the accumulation point may lead to a shift in alumina from strong to weak. Guinea’s intention to reduce production and exports of bauxite, coupled with expectations of reduced overseas supply, will support alumina prices in the short term, but sustainability needs to be observed. (Everbright Futures)