Yide Futures’ recent research on aluminium smelters in IM revealed that some new primary aluminium capacity is still available in IM, but is unlikely to come online in 2019 due to lack of operational quotas. According to Yide Futures, domestic aluminium supply will continue to grow – albeit at a slower rate given relatively weak demand – and domestic supply will continue short in the short- term.
At present, domestic alumina prices have dropped below RMB 2,500/t, but refineries have no intention to cut operations or begin maintenance. Domestic alumina prices are likely to fall further given a glut of alumina supply in the market. The overall comprehensive production cost for primary aluminium smelting is RMB 13,000/t, meaning positive margins of RMB 900/t for smelters, a relatively high level. Primary aluminium stocks are likely to build up in August, so taken in combination with declining alumina prices, domestic aluminium prices are not likely to grow further.