23/07/2025
The policy has ignited the low-position single-fan trend, causing the futures price of alumina to rise strongly
In early July, the futures price of alumina continued to rise, boosted by multiple favorable factors such as disturbances at the Guinea mining end, the continuous decline in warehouse receipts, and the "anti-internal competition" policy. Last Friday, there was another piece of good news in the policy. On July 18th, the Ministry of Industry and Information Technology stated at a press conference that the work plans for maintaining stable growth in ten key industries including steel, non-ferrous metals, petrochemicals, and building materials are about to be released, which will promote key industries to focus on adjusting the structure, optimizing supply, and eliminating backward production capacity. This news led the market to expect a new round of supply-side reform in the alumina industry, boosting the futures price of alumina to rise sharply. In addition, on July 18th, the warehouse receipts of alumina dropped sharply to 6,922 tons. The extremely low level of warehouse receipts has raised market concerns about insufficient liquidity and the risk of warehouse congestion.
The extremely low number of warehouse receipt registrations, coupled with policy expectations, jointly drove the soaring price of alumina futures. Today, the 08 and 09 contracts hit the daily limit up during trading, with the main 09 contract reaching a new high in nearly five months. The intraday trading volume increased by more than 600,000 lots to nearly 1 million lots. What is the actual situation behind the increase in the futures price of alumina? What will be the performance of the fundamentals in the future?
Guinea has entered the rainy season, affecting the short-term supply of bauxite
Since May, the constantly disturbed mining sector in Guinea has introduced new policies. According to SMM, Guinea's Minister of Mines and Geology Bouna Sylla announced a series of "bold" reform measures for the country's mining industry. Minister Bouna Sylla said, "To increase revenue, we are establishing a Guinea bauxite index called GBX, which will be operational in the coming months to ensure that bauxite prices are as transparent as those of other minerals." Guinea's Minister of Geology and Mineral Resources announced the establishment of the Guinea Bauxite Index, raising market concerns over the rise in bauxite prices.
Although there have been continuous disturbances in Guinea's bauxite since May and there will be election activities in Guinea at the end of September this year, it is not ruled out that there will still be new disturbances in the mining policy, which will have a certain boost to the price of alumina. However, considering the specific circumstances, the probability of a supply shortage of bauxite within the year is not high. The inventory of bauxite at domestic ports remains at a high level. As of July 11th, according to Mysteel data, the inventory of bauxite at domestic ports was 27.04 million tons, a decrease of 250,000 tons compared with the previous week. It has been declining for two consecutive weeks, but the absolute value is at a relatively high level in the same period of the past three years. In addition, the inventory of imported sea-floating goods was 16.3834 million tons, an increase of nearly 1 million tons compared with the previous week. It has been accumulated for three consecutive weeks, and the absolute value is at the highest level in the same period of the past four years. Moreover, as the overseas mines have added a considerable amount of new output this year, the production activities of domestic alumina enterprises may not be affected.
It should be noted that Guinea has entered the rainy season, and the supply and shipment of bauxite may be affected. According to Mysteel statistics, from July 11th to July 17th, 2025, the total volume of bauxite shipped from major global countries was 3.8715 million tons. The total volume of bauxite sent to China was 2.1353 million tons, a decrease of 36.80% compared with the previous period. The volume of bauxite drifting at sea was 13.6158 million tons, among which the shipment volume from the port of Guinea was 1.5089 million tons. It declined by 36.80% week-on-week. There may be certain risks in the short-term supply of imported bauxite. Keep an eye on the shipment volume data from Guinea and relevant policies at the mining end.
In terms of domestic mines, thanks to the resumption of production at some mines in Shanxi, Henan and other places, the output of domestic bauxite has increased this year. However, due to the strict approval standards for domestic mines and considering the disturbance of safety production issues, the domestic mines still maintain a regular tightening. Recently, Shanxi Province has introduced a plan to provide natural resource support for the rise of the central region, aiming to further optimize the allocation of incremental resources. However, this plan has a delayed effect on the increase in domestic bauxite production and will not have a significant short-term boost.
From the perspective of bauxite prices, the prices of imported bauxite have all dropped significantly this year. By May, the prices had stabilized. Subsequently, under the policy disturbances in Guinea, the prices of imported bauxite rebounded. Coupled with the fact that Guinea has entered the rainy season, which has affected the supply of bauxite, the possibility of further decline in bauxite prices may be limited, and they are likely to remain in a narrow range of fluctuations. In terms of domestic mines, it is unlikely that there will be a significant relaxation in July. There are still supply release bottlenecks in some regions, and due to the stable prices of imported ores in the third quarter and other factors, the willingness of domestic mines to raise prices cannot be realized.
The warehouse receipts are at an extremely low level, increasing the risk of capital being forced to squeeze out positions
The performance of the alumina warehouse receipts on the Shanghai Futures Exchange this year can be divided into two stages. The first stage was from the beginning of the year to mid-April. Against the backdrop of a continuous increase in alumina supply, the accumulation of inventories persisted, and the futures and spot prices dropped significantly. The industry's hedging willingness was strong, and the warehouse receipts continued to increase, reaching a peak of over 300,000 tons. After the spot price and the market price of alumina stabilized and rebounded, the inventory receipts of alumina began to decline. After the concentrated production cuts by enterprises increased in May, the supply experienced a temporary decline, and the warehouse receipts continued to flow out. By the first ten days of July, the lowest amount dropped to less than 20,000 tons, and last Friday, the warehouse receipts dropped to less than 7,000 lots. The scale was relatively low, providing short-term support for the rise in the futures price of alumina. However, as the issue of shipping from Xinjiang is resolved and the number of warehouses delivered to Xinjiang from various regions increases, the risk of warehouse congestion may gradually decrease. Pay attention to the registration status of warehouse receipts in the future.
The "anti-involution" policy has boosted market sentiment
The "anti-involution" policy has boosted market sentiment. As a variety with a large discount, significant overcapacity and large historical fluctuations, alumina has received favor from funds. However, from the perspective of specific policies, this round of actions mainly targets industries that are generally suffering losses and have long been severely oversupplied, but alumina may not fall into this category for the time being. Although at the beginning of the year, due to the resumption of production and the release of new production capacity, the oversupply led to a sharp drop in the price of alumina and widespread losses for enterprises, with the concentrated production cuts by enterprises, there was a temporary shortage of alumina supply. The contradiction of internal competition was not prominent, and alumina was not explicitly mentioned in the policy for the time being. Although the alumina industry is overcapacity, there is no large amount of backward capacity, and there are relatively few facilities that have been in actual operation for more than 20 years. Therefore, the favorable policies may have a greater emotional impact on the boost to alumina than the actual impact. The current under-construction and ongoing production capacity may have a relatively small impact, but the uncertainty of the long-term planned production capacity implementation may increase.
The output of alumina has been continuously increasing, and the expectation of oversupply is strong
As the profits of alumina have recovered, enterprises have resumed production one after another. The overall operating capacity has increased compared with the previous period, and the output continues to rise. According to data from the China Nonferrous Metals Industry Association, domestic alumina operating capacity increased by 37,000 tons to 1.785 million tons in the first ten days of July, reaching a new high for the year. Recently, the maintenance of some alumina enterprises has restricted the release of production, but the output has continued to rise slightly. According to Mysteel statistics, as of July 17th, the weekly output of alumina in China was 1.792 million tons, an increase of 7,000 tons compared with July 10th.
In the later stage of alumina maintenance, production reduction and resumption of capacity, coupled with the fact that there is still new production capacity to be released, the expectation of oversupply is relatively strong. It is learned that about 2 million tons of new alumina production capacity is expected to be added in the second half of 2025. Among them, a 1 million tons/year production line in Guangxi is scheduled to reach full production capacity in August, and a 600,000 tons/year project in Shanxi has entered the equipment joint commissioning stage. If calculated based on the current commissioning progress, the total domestic alumina production capacity is expected to exceed 50 million tons per year in the fourth quarter, and the loose supply pattern will be further strengthened.
Under the condition that downstream demand remained relatively stable, the inventory of alumina continued to accumulate. As of July 17, 2025, according to Mysteel's statistics, the total inventory of alumina in China was 3.989 million tons, an increase of 39,000 tons compared with July 10.
Overall, under the influence of favorable domestic policies, extremely low warehouse receipts, and the supply situation of bauxite from Guinea, the short-term performance of alumina is expected to be relatively strong, and the market may experience significant fluctuations. However, in the long term, the expectation of oversupply of alumina is strong. There will still be the release of investment and resumption of production capacity in the later period, and the accumulation of social inventories may continue. Moreover, there is still an expectation of an increase in the number of registered warehouse receipts in the future. One should be cautious when chasing high prices and pay attention to the implementation of policies, changes in the operating capacity of alumina and warehouse receipts.
