China alumina imports seen falling 19 pct in 2006
Tue Mar 28, 2006 11:44 AM GMT
By Polly Yam
HONG KONG (Reuters) - China's imports of raw material alumina may fall as much as 19 percent in 2006 with an expansion in the country's capacity, smelter officials and analysts said on Tuesday.
China is the world's top importer of spot alumina. Lower imports may hit world prices of the raw material, which is used to make aluminium, and of the metal.
Robust prices of alumina have encouraged investors and alumina refiners to speed up their projects, industry observers said.
They expect China's alumina output to rise 29-33 percent on the year to between 12 and 13 million tonnes this year.
"They work 24 hours a day," said an analyst for state-owned research group, Antaike, referring to many privately owned alumina projects.
Antaike has adjusted upwards its forecast of alumina production by 9 percent to 12 million tonnes in 2006, of which 9 million tonnes would come from the Aluminum Corp. of China Ltd., the world's second-largest alumina producer.
China's alumina capacity would rise to 15 million tonnes by the end of 2006, the analyst said. Capacity was 9.5 million tonnes last year.
But smelter officials said alumina output could reach 13 million tonnes this year because of rising production at small refineries.
"After a tour to Shanxi and Henan provinces, I think the output could be 2 million tonnes more than the expected output that is 11 million tonnes," a smelter official said.
For example, Cayman Aluminium (Sanmenxia) Co. Ltd. and East Hope Group are each doubling capacity at their newly built alumina refineries in Henan to 800,000 tonnes year.
In Shanxi, a 1 million-tonne-per-year refinery led by power operator Luneng Group is likely to come on stream soon.
In the Shandong province, Xinfa Aluminium Electricity Group will more than double capacity at its newly built alumina refinery to 1 million tonnes by the second half of this year, said a company official.
China's alumina production surged 48.3 percent from a year earlier to 881,700 tonnes in February. Two tonnes of alumina are needed for one tonne of primary aluminium.
Analysts see China's production of primary aluminium rising to between 8.5 and 9 million tonnes in 2006, from 7.4 million tonnes last year, boosting its alumina demand to between 17 and 18 million tonnes.
That forecast puts China's demand for imported alumina at 5 to 6 million tonnes in 2006, against 7 million tonnes last year.
Smelter officials said Chinese smelters might rebuild inventories for two weeks' consumption if alumina prices fell and metal prices stayed steady in coming months, and that could add demand for 730,000 tonnes of imported alumina this year.
Many smelters held low inventories of alumina because of high prices, they said.
Beijing has asked smelters not to import spot alumina above $600 a tonne since the start of the year in an attempt to push down world prices.
This requirement, coupled with higher supplies from local refineries, has reduced spot alumina imports by Chinese smelters, since offers from overseas suppliers have risen 15 percent this year to as much as $690 a tonne.
China's imports of alumina fell 44.2 percent from a year earlier to 379,296 tonnes in February. That was 51.5 percent down from 781,249 tonnes in January.
But smelter officials said some cargo under 2005 contracts had been delayed to January as Beijing cut its tariff to 5.5 percent from 8 percent from that month.
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