Price Volatility in Alumina Value Chain Likely from Structural Shift in China

Structural change is underway in global alumina markets, driven by a major upheaval in the world’s largest producing country, China. Historically, when the ROW over-produced alumina, China acted as the rebalancing sponge that would absorb the surplus. Our proprietary data indicates that this historical norm is changing; a paradigm shift is underway in China’s alumina raw materials supply chain, which could have profound implications for global alumina prices, as well as primary aluminium prices, over the short to medium term.

For over a decade, several large Chinese refineries in Shandong Province operated as merchant businesses that process third-party bauxite, sourced (initially) from Indonesia. Their operations allowed China’s growing primary aluminium demand to be met without having to rely on expensive alumina imports. They were also the primary driver behind China doubling its refining capacity between 2005 and 2015.