Alumina Prices Rise Sharply

Alumina Prices Skyrocket Amid Supply Concerns, Pressure Mounts on Aluminum Markets

The global price of alumina, a critical intermediate material in aluminum production, has surged to more than double its level at the beginning of 2024. Concerns over bauxite supply disruptions, the raw material for alumina, are fueling this increase. Meanwhile, demand for aluminum remains subdued, raising fears of sustained upward pressure on prices in the industry.

Rising Alumina Costs Hit New Highs

Alumina prices have climbed sharply in recent months. Data from S&P Global Commodity Insights shows that as of October 29, the Australian FOB (Free on Board) price for alumina reached $715 per ton, more than doubling from $350 per ton in January. This marks the highest level since August 2010, as tracked by available records.

For aluminum smelters, the rising cost of alumina adds significant strain on profitability. Analysts warn that these costs could be passed down the production chain, potentially lifting aluminum prices further.

Supply Disruptions Drive Price Surge

The surge in alumina prices is largely driven by disruptions in bauxite supply, the primary input for alumina. In Guinea, which accounts for nearly a quarter of global bauxite production, customs authorities halted bauxite exports from Emirates Global Aluminium in October, sparking concerns of a prolonged supply shortfall.

Adding to the uncertainty, a December 2023 explosion at a petroleum storage facility in Guinea has raised fears of fuel shortages, which could disrupt mining and transportation operations.

Supply issues are also emerging in other key producing countries. In Australia, global environmental regulations are impacting the mining of bauxite due to its heavy ecological footprint. “Similar to other ores like copper, the declining grade of bauxite and increasing supply constraints are becoming evident year by year,” noted Eiso Akasaka, an executive in Marubeni’s Light Metals Division.

Together, Guinea and Australia accounted for nearly 50% of global bauxite production in 2023, according to the U.S. Geological Survey (USGS).

Impact on Aluminum Markets

The ripple effects of soaring alumina prices have already reached aluminum markets. On November 7, three-month aluminum futures on the London Metal Exchange (LME) hit $2,732 per ton, the highest level since May.

However, optimism waned after China’s National People’s Congress concluded on November 8 without announcing significant stimulus measures to boost consumption. Although aluminum prices have since eased, they remain roughly 10% higher than at the end of 2023.

Despite aluminum’s widespread applications in industries like automotive and construction, demand remains sluggish. In China, which consumes approximately 60% of global aluminum ingots, inventories on the Shanghai Futures Exchange (SHFE) have soared to 269,000 tons as of November 8—2.7 times higher than at the close of last year.

Outlook

While demand for construction-related aluminum materials, particularly in China’s real estate sector, has yet to recover fully, the steep rise in alumina prices is adding to cost pressures across the aluminum supply chain. Market watchers warn that unless supply disruptions ease, the aluminum industry may continue to face significant pricing volatility.