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Alumina Demand on Track to Increase Considerably in 2020-2021

KEY MESSAGES

ALUMINA

1. World alumina demand is set to accelerate sharply in 2020 as smelting profitability improves and restarts/expansions take place around the world. HARBOR expects world alumina demand to expand by 4.4% y/y in 2020 after an estimated increase of just 0.5% y/y in 2019. We expect this acceleration to be driven by smelting gains in China (expansions in Yunnan), Canada (ABI), Bahrain (Alba), Brazil (Albras), and India (Vedanta).

2. World alumina demand is expected to increase another 4.5% y/y in 2021, since as much as 1.3 million mtpy of new primary aluminum capacity could start ramping up in the Western World within the next twelve months (Iran, India, Russia, and Malaysia), while around three million mtpy of new smelting capacity in China could also start ramping-up in this timeframe.

3. However, the global alumina market will remain well supplied in the next few years mostly amid booming alumina production. HARBOR continues to expect the global alumina market to remain in surplus during the 2020–2022 period. The production surplus in this period could average 1.7 million mton per year due to expansions in China, the United Arab Emirates (EGA's refinery), India (Nalco and Hidalco's brownfield expansions, and possibly Vedanta's), and Indonesia (Nanshan Group and Hongqiao's phase II). Additionally, we expect China’s alumina market to structurally shift to a self- sufficient/surplus in these period.

4. HARBOR sees Australia alumina prices in a bottoming-out process, but any rally should be capped by the expected market surplus. Australia alumina spot prices should bottom-out in the next few months, strongly supported by the $240-$270 per mton range. After bottoming-out, prices are expected to have limited rally and average $293 per mton in 2020, down from $331 per mton in 2019.