According to Mining News Pro - * Wide-open arbitrage window for Chinese alumina exports
* Contracts for over 140,000 T signed in July -consultancy
* Rusal sanctions, China output cuts could exacerbate
shortage
By Tom Daly and Melanie Burton
BEIJING/MELBOURNE, Aug 28 (Reuters) - China is shipping
unusually high volumes of alumina for a second time this year to
an international market desperate for the ingredient used to
make aluminium, traders and analysts said, even as domestic
prices rise and put pressure on smelters.
Contracts to export over 140,000 tonnes of alumina from
China were signed in July amid a favourable price arbitrage,
according to consultancy CRU. That`s almost three times as much
as was exported all of last year, Chinese customs data shows.
China, the world`s top aluminium producer, has rarely
exported significant volumes of alumina. That changed in April
when U.S. sanctions on Rusal compounded an outage at
Norsk Hydro`s Alunorte plant in Brazil, deepening a
global shortage of the white powder. International alumina prices are up 37 percent
year-to-date to just under $560 a tonne, making Chinese exports
profitable even though spot alumina prices in the smelting
heartland of eastern China have surged by 20
percent from end-June to 3,300 yuan ($480.07) a tonne.
"The price differential between the rest-of-the-world market
and the Chinese market is significant," said a Europe-based
alumina trader, whose usual business of shipping alumina into
China has been turned on its head.
The arbitrage shut after an initial wave of Chinese exports
in May and June, but it is wide open again, with alumina cargoes
heading to Europe, Africa and other parts of Asia, he said.
High alumina prices have been a boon for China Hongqiao
Group , whose revenues for the material increased
almost fivefold year-on-year in the first half of 2018.
Australian duo South32 Ltd and Alumina Ltd are
also cashing in. Smelters without their own alumina refineries, however, are
suffering from high input costs, and the situation could worsen,
industry sources warned, especially if a strike at Alcoa Corp`s operations in Western Australia starts to affect output.
China is also set to repeat 30 percent output curbs on
alumina in 28 northern cities this winter, further tightening
supply, while more stringent 50 percent cuts on carbon anode
production are another concern.
"So costs are exploding (and) many smelters (globally) are
losing money," said an analyst at a hedge fund.
"Most importantly, and hardly anyone talks about it, there
is a real risk that Rusal sanctions will not be lifted any time
soon, definitively not before the (U.S. mid-term) November
election," he said.
U.S. customers of Rusal have until Oct. 23 to wind down
business with the Russian aluminium giant, which produces around
6 percent of global alumina supply. ($1 = 6.8740 yuan)
(Reporting by Tom Daly in BEIJING and Melanie Burton in
MELBOURNE; Editing by Tom Hogue)