Bearish price outlook for Chinese alumina in 2020

Asian Metal: Hello Mr Pi! Thanks for take this interview. As a well known enterprise in aluminum industries, how's the operation of your alumina and aluminum plants over the past two years?

Mr Pi: Generally speaking, both our alumina and aluminum enjoyed a stable operation over the past two years with almost full production capacity. Only the alumina plant in Henan cut a little production this year due to the environmental control policy.

Asian Metal: Given the tight local bauxite supply, most alumina plants in Shanxi and Henan started using imported bauxite over the past year. How do you think this condition?

Mr Pi: Actually our two plants in Shanxi and Henan also started using imported bauxite to ensure regular production. In my view, there is no choice for alumina plants in inland China to do that. As far as I know, around 8 million tons per year of alumina capacity already conducted technical upgrading among this year. However, only few enterprises got a good result of production costs reduction, while most are not satisfactory due to the high carriage cost of imported bauxite. Besides, using imported bauxite could not reduce too much production cost if prices of domestic bauxite and caustic soda went down.

Asian Metal: How's the difference between local bauxite and imported bauxite, and which point should be noticed in the technical upgrading of alumina plants in inland China?

Mr Pi: The imported bauxite is mainly trihydrate bauxite, which is suitable for low temperature dissolution system, resulting lower energy and caustic soda costs compared with local bauxite. However, due to the high organics in imported bauxite, alumina enterprises should add clearing processing accordingly in the upgrading. Besides, the high unit consumption of imported bauxite in alumina production would lead high carriage costs.

Asian Metal: Alumina prices remained sluggish in H2 2019. How do you think the price trend in the following year?

Mr Pi: Due to the excessive supply, alumina prices in China remained bearish over the past half year. Besides, the resumption of Hydro's Brazilian alumina plant and the start of EGA's new alumina project result an oversupply in the global market as well. Prices for imported alumina are lower than that in the domestic market, which weight on Chinese alumina prices. Besides, the downstream demand also decreased due to the reduction of aluminum production capacity. In my oMr Pinion, it is difficult for alumina prices to be strong in 2020, as some new projects would put into production in the coming year, while the demand from downstream aluminum plants cannot grow soon. Alumina enterprises in Shanxi and Henan, the high-cost regions, would face great challenge.

Asian Metal: Aluminum prices stayed bullish in December. What's your expectation on aluminum price trend in the coming year?

Mr Pi: It is difficult for aluminum prices remaining at a high level, as the downstream demand and the aluminum sections export market are still not so good. In addition, new aluminum projects in Southwest China would come into stream successively in the coming year, which would pressure the price.

Asian Metal: SHFE would publish alumina futures in 2020. Are there any new chances for alumina enterprises?

Mr Pi: It is good news for alumina enterprises. The first target for alumina producers is stable production. They know well of their products and the entire aluminum industries, and thus they could conduct risk management and earnings guarantee by using financial instruments.

Asian Metal: Do you have any new projects in the coming few years?

Mr Pi: Jinjiang Group invests a new alumina project in Guangxi, with a designed production capacity of 1 million tons per year, which started construction from the end of 2019. Besides, we are scheduled to establish an alumina refinery in West Kalimantan, Indonesia, with a total designed production capacity of 4.5 million tons per year. The first stage for the project, with a capacity of 1.5 million tons, is going to be initiated this year and put into operation 2-3 years later.

Asian Metal: Thanks for your shares and wish great success of your business!