Thanks to significant and ongoing turmoil in the global aluminium market, refiners of alumina in the People’s Republic of China have again been coaxed into selling their wares at large volumes on the international market.
According to numbers from CRU, a favorable price arbitrage prompted Chinese refiners to sign contracts to ship over 140 thousand metric tons of alumina last month, a threefold increase from last year’s total contracted volume.
Shipping anything but token volumes of alumina outside its borders is an anomaly for the Middle Kingdom, as domestic demand is generally sufficient to soak up all of it that is refined. However, a perfect storm this spring involving strict sanctions on Rusal by the Trump administration and a production interruption at the world’s biggest alumina refinery in Brazil made global supplies suddenly quite scarce.
As a result of the dwindling availability of alumina, prices skyrocketed. At present the cost of one metric ton of alumina is US$560, up by 37 percent since the first of the year, beating out the 20-percent rise of Chinese alumina, which currently fetches around US$480 per metric ton.
“The price differential between the rest-of-the-world market and the Chinese market is significant,” explained a European alumina trader to Reuters.
The European trader continued by noting that the initial arbitrage situation this spring lapsed earlier this summer, but arbitrage is back on again, sending alumina shipments to buyers in Europe, Africa, and elsewhere in Asia.
The rise in prices has worked wonders on the bottom line of China Hongqiao, which reported a quintupling of revenues thanks to sales of alumina. However, for smelters dependent upon third parties for their alumina supply are in a significantly worse position, especially in the event that an ongoing strike at Alcoa’s facilities in Western Australia makes an impact upon supplies.
In addition, sanctions on Rusal are not expected to be lifted prior to midterm elections in the United States, which will occur in early November. At present, United States customers have until late October to cease business dealings with the firm or face similar consequences.