China alumina market seen swinging to million-tonne surplus in 2022 as prices surge

TAIYUAN: China's alumina market will likely see an oversupply of 1.01 million tonnes next year on a slew of new investments and record prices, research house Antaike and industry experts said on Wednesday.

Chinese supply, including imports, will likely rise 2.6% year on year in 2022 to 80.3 million tonnes, while demand for alumina, used to make aluminum, is seen at 79.29 million tonnes, said Huo Yunbo, an analyst with state-backed Antaike.

That leaves a surplus of 1.01 million tonnes of alumina in China for 2022, compared to a projected 30,000-tonne deficit this year and a 150,000-tonne shortage in 2020, she told a conference at Antaike's China International Aluminium Week.

The switch in alumina balance comes amid surging prices.

Average Chinese alumina spot prices assessed by SMM hit a record 3,975 yuan ($616) a tonne this week, surging 93% from April last year, while prices on the Comex exchange hit a three-year high of $480 a tonne.

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China's existing domestic alumina capacity was at 90.15 million tonnes, with another 9.4 million tonnes being constructed and 20.2 million tonnes planned, Fan Shunke, vice party chief of the China Nonferrous Metals Industry Association, told the conference.

Once completed, domestic alumina capacity could exceed 120 million tonnes, while overseas capacity built and planned by Chinese producers, mainly in Guinea and Indonesia, could add another 18.35 million tonnes, he said.

"The enthusiasm towards alumina investment is too high," Fan added, suggesting strict control on overall capacity and encouraging alumina imports "at an appropriate amount".

Antaike's Huo warned of uncertainty for those planning alumina projects - a notoriously dirty industry - as Beijing steps up emission controls to meet its climate commitments.

Demand for the material could also be dampened by easing growth in aluminum output, which could be 1% next year, down from 4.8% in 2021, she added.

In a separate speech given by Shen Lingyan, another Antaike analyst, China's aluminum sector is expected to switch to a deficit of 200,000 tonnes in 2022, from a projected 180,000-tonne surplus this year, Antaike data showed.

Antaike forecast average three-month ShFE aluminum prices will fall 6.5% year-on-year to 18,000 yuan a tonne next year.

The contract closed at 23,320 yuan a tonne on Wednesday, the highest since 2006.