TRADE REVIEW: Global alumina prices may soften in Q1 on new Asian capacity

This report is part of the S&P Global Commodity Insights' Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, metallurgical coal, copper, alumina, cobalt, lithium, nickel and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts to new arbitrages, and to quality spread fluctuations.

The global alumina markets might ease further in the first quarter of 2025, descending from the peaks observed in late 2024. This shift is attributed to the ramp-ups in new refinery capacities across Asia. However, disruptions related to bauxite in the Atlantic could limit the extent of price declines, especially if challenges in ore supply remain unaddressed.

In the fourth quarter of 2024, alumina prices globally rose on the back of bauxite shipment delays and suspensions out of Guinea and Brazil, as well as spot supply tightness in China.

The Dec. 4-5 assessments of Alumina FOB Australia at $805/mt marked a record high for the Platts Alumina Index (PAX) since its inception in August 2010, surpassing the last high in April 2018, S&P Global Commodity Insights data showed. Similarly, the Dec. 3-9 Platts assessments of alumina ex-works China at Yuan 5,850/mt were also a peak in PAX history.

Platts, part Commodity Insights, assessed benchmark Australian alumina at $570/mt FOB Jan. 17, down 29% from the peak in December, while the FOB Brazil Atlantic Differential (AD) was at a $22/mt premium.

The Platts-assessed Chinese domestic alumina price was at Yuan 4,300/mt ex-works Shanxi Jan. 17, down 26% month over month.

Indonesian alumina, aluminum sector in spotlight

Market participants are eyeing developments across the Indonesian aluminum chain, including new alumina refinery capacity ramping up in Q1 and potential expansions of primary aluminum production in the country.

Anticipated new commercially-ready alumina supply out of Indonesia in 2025 includes projects such as the Inalum-Antam JV Mempawah refinery, Hangzhou Jinjiang's PT Borneo Alumindo Prima refinery and Shandong Nanshan's Bintan Alumina Indonesia third phase expansion.

The Mempawah refinery started its 1 million mt/year smelter grade alumina refinery at Mempawah, West Kalimantan, in late September 2024. Mempawah is operated by PT Borneo Alumina Indonesia (BAI), which is jointly owned by PT Indonesia Asahan Aluminium (Inalum) with a 60% stake and PT Antam which owns 40%.

Alumina output from the plant is expected to be commissioned in two phases of 500,000 mt each, as the refinery ramps up to full capacity over H1 2025, with a trial production period of about six months, according to sources familiar with operations. At full capacity, Mempawah will consume about 3.3 million mt/year of bauxite.

Inalum might continue to procure alumina externally in the near term, while operations and output stabilize at Mempawah. It could become a net alumina seller at some point when the refinery is operating at full capacity, assuming Inalum smelting capacity remains unchanged, sources added.

The Jinjiang plant and Bintan expansion could commission commercial production in Q2-Q3, though market participants are continuing to monitor construction progress at these plants at this juncture.

On the primary aluminum side, Platts reported earlier in November that the PT Hua Chin primary aluminum smelter in Indonesia postponed the ramp-up of the second phase of its smelting capacity on tight alumina supply.

The smelter, a joint venture between China's Huafon Group (65%) and Tsingshan Group (35%), has an initial operating capacity of 250,000 mt/year of primary aluminum.

Hua Chin had initially planned to double its capacity to about 500,000 mt/year by the end of 2024.

The smelter could resume its expansion plans if alumina prices fall further and aluminum prices hold firm, market sources said, and also pointed to increasing alumina procurement inquiries by the smelter in recent weeks.

Preliminary transactions for the quarterly main Japanese ports aluminum premium were reported at $228-$233/mt, marking a 30% increase from the Q4 2024 settlement, according to market participants.

Participants eye updates out of Mozambique, Guinea

Market participants are also eyeing updates on the Mozal aluminum smelter in Mozambique and the bauxite export suspension of GAC out of Guinea.

Mining and metals company South32 was able to resume transport of alumina from the port to its 63.7%-owned Mozal Aluminium smelter near Maputo, Mozambique, after road blockages caused by civil unrest were cleared, it said in a Dec. 19 update.

However, the miner said: "Any escalation in civil unrest, including the following announcement of the election results by the Mozambique Constitutional Council, expected on Dec. 23, 2024, has the potential to impact our critical trucking activity and operations."

The smelter is not alone; other mining operations in Mozambique also disrupted due to the nationwide unrest.

Market sources said that continued disruptions at Mozal could mean that some alumina shipments from Worsley in Western Australia could be diverted or reallocated to the spot market.

Meanwhile out of Guinea, no major updates have been heard on GAC's bauxite shipment suspensions thus far.

Market participants noted the uncertain supply of Guinean bauxite might provide some cost support to alumina spot prices, in particular Chinese domestic prices, given their high dependence on Guinean ore.

China's monthly bauxite imports have remained above the 10 million mt mark since November 2022, with Guinean bauxite making up more than two-thirds of 2024 volumes.

"Additional alumina capacity in Indonesia and China in 2025 will sharply reduce the 2024 deficit of 3.0 million mt," said Karen Norton, principal analyst for aluminum at Commodity Insights, but cautioned that downside in prices could be constrained(opens in a new tab) by "developments in China and continued disruption upstream in bauxite" in the near term.

Looking ahead in the quarter, market participants are expected to monitor progress at the Indonesian project ramp-ups, as well as the situation in the Atlantic across Guinea and Mozambique for further guidance on supply-demand outlook and prices.