China Alumina & Aluminum Outlook: Demand, output tipped to rise further in Q2

Singapore — China's alumina and aluminum demand and output are expected to continue rising in the second quarter of 2021, while alumina price levels will likely remain unchanged amid strong domestic output, according to the latest S&P Global Platts China Alumina & Aluminum Outlook.

Primary aluminum prices, on the other hand, could rise due to supportive fundamentals such as production cuts and the peak demand season, the outlook found.

Around 73% of the respondents expected China's alumina demand to continue to rise in Q2, thanks to the increase in demand from China's primary aluminum smelters.

A total of 64% held the view that domestic alumina prices might increase slightly or remain unchanged in Q2. Most respondents expected China's alumina prices to hover around Yuan 2,300-2,400/mt ($351-$366/mt) in Q2.

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China's alumina prices may come under pressure in the near term as operating rates of domestic alumina producers remain high. Further, output cuts by primary aluminum smelters in Inner Mongolia may result in slightly lower demand. But high aluminum prices and production costs will lend some support to domestic alumina prices, respondents said.

Half of the market participants expected China's demand for seaborne alumina to decrease in Q2 in view of higher seaborne prices and rising freight costs.

Some 77% expect China's primary aluminum output to rise in Q2.

Most respondents took an optimistic view of domestic primary aluminum prices in Q2 and expected prices to be above Yuan 17,000/mt.

Around 46% of the respondents said the import arbitrage opportunity will remain viable in Q2, while 36% thought otherwise.

The recovery in domestic aluminum consumption is expected to be robust in the coming months, market sources estimated.

The medium-to longer-term outlook for both aluminum prices and profit margins was optimistic on expectations China's carbon-neutrality targets would boost demand from the new energy vehicles and photovoltaic sectors, while aluminum capacity increases would be curtailed.

Platts spoke with 22 companies, comprising producers and aluminum smelters, and domestic and international trading houses.