Wed, July 24, 2024

Aluminium Production Hits 3.65M Tons in May 2024

Производство алюминия достигнет 3,65 млн тонн в мае 2024 года

Quick Look:

  • Aluminium production hit a record 3.65 million metric tons, a 5% year-on-year increase. 
  • Increased aluminium production has tightened the alumina market, pushing prices to 3,910 yuan per ton.
  • Improved rainfall in Yunnan Province alleviated power shortages, boosting production to 1.15 million tons.
  • Concerns over bauxite supply from Guinea and environmental inspections have driven price volatility.

May 2024 witnessed a significant milestone in primary aluminium production, reaching an impressive 3.65 million metric tons. This figure represents a notable 5% year-on-year increase, setting the stage for an annualized output of 43.0 million tons. Such robust production levels have not been seen since the record-setting months of September and October last year. The aluminium industry seems poised for continued growth, buoyed by various factors contributing to this remarkable output.

Tightening Alumina Market and Price Dynamics

The surge in primary aluminium production had a ripple effect on the alumina market, leading to tighter conditions. The increased demand for alumina, a critical raw material in aluminium production, has driven prices to levels reminiscent of late 2021. This price escalation is underpinned by solid cost support for aluminium prices, indicating a closely linked relationship between alumina supply constraints and aluminium market stability.

Yunnan Province’s Pivotal Role in Production

Thanks to improved rainfall alleviating previous power shortages, Yunnan Province has emerged as a crucial hub for aluminium production. After lifting operating restrictions, the positive environmental shift has enabled the restart of production, totalling 1.15 million tons. Moreover, Yunnan’s annual smelter capacity is nearly 6 million tons, solidifying its role in primary aluminium production. The province’s recovery and increased production highlight its resilience and importance in the aluminium supply chain.

Annual Production Growth and Market Recovery

The aluminium industry has demonstrated a robust recovery from a drop in November, with annual production growth expected to exceed 1 million tons in 2024. This growth trajectory reflects a broader recovery trend within the market, spurred by increased output and the resumption of previously curtailed operations. Moreover, the recovery is a testament to the sector’s adaptability and capacity to overcome short-term disruptions.

Alumina Supply and Price Performance

There is a mismatch between the rise in primary aluminium production (5.4%) and alumina output (3.4%) in early 2024. This supply-demand imbalance has driven spot alumina prices to 3,910 yuan ($537.95) per ton. ShFE contracts peaked above 4,000 yuan in May before settling at around 3,800 yuan. Furthermore, the aluminium market saw a 3.5% price increase since January 2024. Alumina prices have surged by 15.3%, underscoring alumina’s critical role in the aluminium value chain.

Factors Driving Price Volatility

Several factors have contributed to the volatility in aluminium and alumina prices. Concerns over bauxite supply from Guinea in January and Rio Tinto’s force majeure declaration in Queensland in May have exacerbated market uncertainties. Additionally, environmental inspections leading to bauxite mine suspensions have further tightened supply. The industry’s heavy reliance on bauxite imports from Guinea makes it particularly sensitive to overseas supply disruptions, adding another layer of complexity to price stability.

Alumina Trade and Future Outlook

Alumina trade dynamics have also shifted significantly, with imports totalling 1.15 million tons from January to May 2024, marking a 60% year-on-year increase. Exports to Russia have surged dramatically from 1,750 tons in 2021 to 1.12 million tons in 2023 and 610,000 tons in 2024, representing a 46% increase. Despite these export figures, the country remains a net importer of alumina by just under 500,000 tons in 2024.

Analysts expect the alumina squeeze to ease as high prices boost supply and demand slows with Yunnan’s restart completions. Prices are expected to peak in the third quarter of 2024, with a projected 220,000-ton surplus by year-end. However, supply chain stability is unpredictable, with new vulnerabilities from dependence on imported bauxite affecting aluminium pricing.

Alumina Imports Surge by 60% in Early 2024

The aluminium market 2024 is characterized by impressive production growth, a tightening alumina market, and significant trade shifts. The dynamic interplay of these factors continues to shape the industry, presenting challenges and opportunities. As the market adapts to evolving supply and demand conditions, stakeholders must remain vigilant to navigate the complexities of this ever-changing landscape. With a USD to CNY exchange rate of $1 = 7.2683 yuan, global market interactions and pricing strategies will continue to play a pivotal role in determining the future trajectory of the aluminium industry.

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