According to China Nonferrous Metals News, alumina futures prices have continued to weaken since mid-August. While signs of stabilization emerged in late October, the trend subsequently turned downward again. Loose supply and rising inventories remain the primary bearish factors.

Bauxite Supply Relatively Ample

In October, national bauxite output reached 4.7723 million tons, a slight month-on-month decrease of 2.2% and a year-on-year decline of 6.9%. From January to October, cumulative national bauxite production totaled 50.5155 million tons, up 5.2% year-on-year. Currently, enterprises in Shanxi and Henan provinces that were previously affected by environmental policies and the rainy season have met the conditions for resuming production, with specific restart dates pending government approval.

As of last Thursday, alumina plants held bauxite inventories of 52.45 million tons, showing a slight month-on-month decline but remaining at elevated levels overall, with weak restocking intentions.

In September, China imported 15.88 million tons of bauxite, down 13.2% month-on-month but up 38.1% year-on-year due to the rainy season in Guinea. From January to September, cumulative imports reached 157.305 million tons, a nearly 32% year-on-year increase, with Guinea accounting for 75% of imports. Currently, the impact of Guinea's rainy season has largely subsided, with bauxite shipments rebounding. This recovery will be reflected in China's November import data.

In the short term, no significant disruptions have occurred at overseas mines, maintaining overall ample supply of imported ore. As of last weekend, domestic port bauxite inventories stood at 27.3584 million tons, down 359,300 tons from the previous week.

Expectations for Production Cuts Intensify

Data indicates that China's metallurgical-grade alumina output reached 7.7853 million tons in October, marking a 2.4% month-on-month increase and a 6.8% year-on-year rise. Cumulative production from January to October totaled 74.458 million tons, up 8.1% year-on-year. Daily output slightly declined in October, constrained by routine maintenance at northern plants and tight domestic ore supply, while southern smelting capacity utilization also decreased. Since July, China's installed alumina capacity has remained stable, with no new capacity coming online in recent months.

As of last Thursday, the nation's installed metallurgical-grade alumina capacity reached 110.32 million tons/year, with operating capacity at 90.657 million tons/year. The weekly enterprise operating rate dipped slightly by 0.24% to 82.18%. While enterprises in Guangxi saw a minor decline in operating rates, overall operating capacity hovered at elevated levels.

Given the current operational capacity, downstream electrolytic aluminum demand is adequately supported, maintaining a broadly relaxed supply-demand balance for alumina. With alumina prices approaching the industry's average cost line and profits squeezed, expectations for production cuts among alumina producers are rising, potentially strengthening support from both cost and supply sides.

As alumina output increases and spot supply expands, domestic inventories have been climbing since August. As of last week, total alumina inventories on the Shanghai Futures Exchange reached 248,000 metric tons, with warehouse receipts at 237,000 metric tons—relatively high levels.

Latest data shows domestic total alumina inventories at 4.732 million metric tons, still climbing. Primary aluminum smelters hold 3.269 million metric tons of alumina inventory, indicating relatively ample raw material reserves.

Primary Aluminum Output to Decline in November

Looking downstream at primary aluminum, data indicates China's primary aluminum output reached 3.7421 million tons in October, up 3.5% month-on-month and 1.1% year-on-year. Cumulative production from January to October totaled 36.506 million tons, a 1.9% year-on-year increase. Entering November, environmental factors may impact production at some facilities, with primary aluminum output expected to decline to 3.62 million tons.

Amid falling alumina prices and persistently high aluminum prices, aluminum producers have maintained strong profitability, with theoretical spot margins exceeding RMB 4,000/ton for several consecutive months. However, capacity constraints limit potential increases in both operational capacity and output. Long-term, the industry chain may see profit recovery, with robust aluminum prices potentially providing support for alumina prices.

Overall, the alumina supply-demand landscape remains accommodative with inventories persisting at elevated levels. While alumina prices face significant downward pressure, robust cost-line support limits further decline potential.

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