Alumina Market to Remain in Surplus in Spite of Alpart Curtailment

KEY MESSAGES

ALUMINA

1. Australia alumina spot prices remain trading below $300 per mton. Australia spot alumina prices are being quoted at $296 per mtton FOB, down 2% m/m in a context of slow spot activity as buyers have remained mostly on the sidelines. Lower LME primary aluminum prices (down 4% m/m in August) have also continued to put downward pressure on alumina spot prices.

2. Alpart alumina refinery in Jamaica will completely shutdown in the next few months. Company sources have said that production at the 1.65 million mtpy refinery will be curtailed starting in October as it will receive a major equipment revamp to increase its production capacity to 2.0 million mtpy. The plant, owned by Chinese aluminum company JISCO, has been operating at about 50% of capacity and will be closed for 18-24 months. JISCO bought the plant from Rusal in 2016 and restarted it in 2017 after eight years of being completely closed.

3. HARBOR still expects metallurgical alumina production in the Western World (ROW) to expand in spite of the production curtailment at Alpart. HARBOR expects ROW's alumina production to expand by 3.4% or 2.0 million mton in 2020 in spite of Alpart’s curtailment. This gain will come on top of this year's expected production increase of 7.0% or 3.8 million mton (the fastest annual pace in a decade). ROW's output is set to expand mostly due to the effect of the restart of Alunorte refinery in Brazil and ongoing ramp-up of EGA's new 2.0 million mtpy alumina refinery in UAE that began production during the H1 2019.

4. In China, alumina production restarts and new projects hitting the market continue to offset curtailments. HARBOR's intel suggest that about 1.6 million mtpy of alumina production capacity has been curtailed in the last month as a result of lower alumina prices. However, there are also indications of new alumina refineries and restarts totaling 0.9 million mtpy during the same period. Additionally, Xinfa will restart its 2.8 million mtpy Shanxi Jiaokou refinery in September, and East Hope will restart 1.5 million mtpy of capacity at its 3.2 million mtpy Shanxi Jinzhong refinery in October. Meanwhile, about 2.6 million mtpy of new alumina production capacity is expected to hit the market in 2H 2019.

5. HARBOR expects alumina spot prices to ultimately bottom out at levels as low as $250-$270 per mton amid a shift to a growing world alumina production surplus. Indeed, with the confirmed restart of the Alunorte refinery in Brazil and alumina production expansions in China and the Middle East, the world's alumina market is expected to switch to a surplus of 2.9 million mton in 2019 after a deficit of 1.3 million mton in 2018. For 2020, we expect the world's alumina market to experience a production surplus of 4.3 million mton, even after the accounting for Alpart's refinery curtailment.