The trading debut of alumina futures in Shanghai was a successful one, as expected rising demand for the mineral boosted prices.
The most prolifically traded contract was that for November delivery, which rose by up to 3.8 percent over the course of the trading day. The price peaked at CN¥2,721 yuan (US$379.95) per metric ton, as trading volume was 91,505 lots of 20 metric tons each.
Experts say demand for alumina is peaking just as shuttered capacity comes online in Yunnan province. The province has seen a rise in available hydropower, leading to raised restriction on production capacity.
Additionally, Indonesia instituted a ban on export of bauxite two weeks ago, leading to a drop in supply and a corresponding increase in cost of alumina production. The base price for alumina contracts at the SHFE was set at CN¥2,665 per metric ton, but the cost of production figured at CN¥2,740 as a result.
Currently, China is expected to restart 5 million metric tons per annum of alumina production this year, boosting the country’s already substantial production capacity of 86.50 million metric tons per annum.
The Middle Kingdom has refined 33.51 million metric tons of alumina through the end of May, rising by 2.3 percent on the year.
Su Yanbo, a researcher at Beijing Aladdiny Zhongying Business Consulting, told Reuters that alumina futures contracts in Shanghai offers several new advantages to the domestic alumina market.
“Having alumina futures will boost an inactive spot market and provide more guidance in spot prices,” he offered.