China has increased its domestic alumina capacity to satisfy the increase in Smelter Grade Alumina (SGA) demand. This geographical shift in capacity, along with energy costs and raw materials supply sources, has had a major impact on alumina producers outside China. The past has seen competitive pressures lead to curtailments and product changes of several previously well-established SGA suppliers. How will these operations fare in the future?
Factors Affecting the Alumina Industry Outside China
Low alumina prices followed the 2007 GFC. Price depression was due to legacy LME metal price linkage during low metal price periods along with rapid refinery capacity development concurrent with smelter developments in China. The low alumina price environment contributed to significant curtailment of ex-China SGA production capacity up to 2016. This has helped create a tight alumina market, particularly for smelters outside China and made alumina spot prices highly sensitive to any supply uncertainty.
Fuel oil price has been a significant compounding factor to the viability of several refineries. It was commonly used by refineries to generate site steam and power requirements. The fuel oil price more than doubled over the period from 2005-2013. This represented a significant increase in the energy costs for a number of sites and directly contributed to unsustainable costs and subsequent closures.