Chinese Alumina Futures Reach Record Highs Amid Guinea Supply Concerns

Surge in Futures Market

Chinese alumina futures experienced a significant surge, reaching record highs, following an explosion in Guinea, a key bauxite supplier. The February alumina contract on the Shanghai Futures Exchange (SHFE) soared by 7% to an unprecedented 3,184 yuan ($446.93) per metric ton. Similar spikes were observed in the March contract, which hit 3,196 yuan, and the April and May contracts also jumped by 7%. The January and June contracts increased by over 6%.

Factors Influencing the Price Hike

According to Mysteel, a consultancy, the price hike in China's alumina market was influenced by a combination of reduced alumina operating capacity and rising concerns over Guinea's bauxite supply. This decrease in operating capacity is partly attributed to north China's winter cuts policy, further impacting the overall operating rate in the alumina sector.

Guinea's Explosion Impact

The explosion at an oil terminal in Guinea, which resulted in the destruction of fuel tanks and forced evacuations, has raised fears of bauxite transportation disruptions. This could potentially lead to a shortage in China. The incident adds to the existing supply issues in China caused by mining safety inspections in Shanxi province, where bauxite prices have already hit a record high.

Analyses and Predictions

Despite the explosion's impact, reports from Chinese consultancy Aladdiny suggest that the short-term effects might be limited as bauxite miners in Guinea have stockpiles at the port and mining operations remain ongoing. A China-based trader anticipates that alumina futures might drop below 3,150 yuan in the next trading session, citing sufficient current bauxite inventory in China for the upcoming two to three months.