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Alumina Spot Prices Near Bottom, Upside Still Capped by Fundamentals

Special Price Outlook Report

Executive Summary

  1. Alumina spot prices have fallen to their lowest level since May 2017.
    After collapsing 61% since April 2018, Australia alumina spot prices stand at $280 per mton FOB, basically unchanged m/m and near the 2.5-year lows of $277 per mton reached last month.
     
  2. HARBOR sees Australia alumina prices in a bottoming-out process.
    Australia alumina spot prices should bottom-out in the next few months, strongly supported by the $240-$270 per mton range, as: a) the market is turning into a more balanced position, b) Chinese demand for imported alumina is picking up in response to low Australian spot prices and, c) alumina production in China contracts. Moreover, alumina is already cheap relative to LME primary aluminum and alumina production costs. Indeed, alumina prices have historically not traded for long below the $300 per mton mark.
     
  3. Industry fundamentals signal lower average alumina spot prices in 2020 compared to 2019.
    HARBOR expects alumina prices to average $302 per mton in 2020, compared to $330 per mton in 2019. We forecast lower average prices in 2020 vs 2019 mostly on: a) expectations of a global alumina market in surplus amid strong production growth in the Western World, and b) lower average primary aluminum prices.