Key information
- Alumina prices hit a record high of $707.59 per tonne.
- Supply chain disruptions in Guinea, Australia and China are behind the increase.
- Experts predict supply chain issues will persist throughout the year.
Alumina prices hit a record high of $707.59 per tonne on Wednesday, approaching the 2018 peak of $707.75. The increase is attributed to continued supply chain disruptions and production limitations in major alumina-producing countries such as Guinea, Australia and China.
Supply chain disruptions
Supply constraints are particularly severe in Guinea, a major exporter of bauxite – the raw material for alumina – which supplies more than 70 percent of China’s imports. Commercial conflicts with local authorities have further aggravated the situation. At the same time, Australia, another major producer of bauxite and alumina, has seen its exports decline due to policies to combat climate change and the scarcity of natural gas resources.
Market Forecast
Experts predict these supply chain issues will persist throughout the year, with no immediate relief in sight. Alumina inventory levels at Chinese smelters have declined, but market participants have yet to factor in production cuts as a likely scenario.
Industry concerns
Financial institutions like UBS and Morgan Stanley are highlighting growing concerns over bauxite and alumina supply chains. Dominic Schnider, analyst at UBS, highlights that current challenges arising from site closures, export restrictions and force majeure events in Australia and Guinea will likely continue to influence aluminum prices until the end of the year.
Global Aluminum Market
Morgan Stanley echoed these sentiments, stating that the global aluminum supply chain is under significant strain, particularly regarding China’s access to alumina and bauxite. . Analysts are speculating on the potential impact on aluminum markets if China implements a large-scale stimulus plan.
Bauxite and alumina are important raw materials in aluminum production. Bauxite is an ore consisting primarily of aluminum-containing minerals. It is the main source of aluminum production and is extracted in mines. In addition to aluminum, bauxite also contains iron, silicon and titanium, which often must be removed before aluminum can be extracted.
Alumina is the purified form of aluminum oxide (Al₂O₃) and is obtained by processing bauxite. This purification process, known as the Bayer process, separates the aluminum oxide from the other minerals in bauxite. Alumina is an intermediate product which is then transformed into pure aluminum by an electrolytic process (Hall-Héroult process).
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