New Alumina Capacity Set to Ease Tight Supplies and Halt Price Rally
New capacity for converting bauxite into alumina is expected to come online next year, potentially easing the current tight supplies and halting the record-breaking price rally of this key material used in aluminium production. Higher alumina prices outside China have turned the country, the world’s largest producer and consumer, into a net exporter this year from a net importer, also pushing up aluminium prices used in transportation, construction, and packaging industries.
Disruptions in bauxite supplies from Guinea and Brazil, as well as output suspensions in Australia, have contributed to a 70% surge in alumina prices this year, reaching a record 5,645 yuan ($779.77) per metric ton on the Shanghai Futures Exchange. Aluminium prices have also increased by about 7% this year. Eivind Kallevik, CEO of Norwegian aluminium producer Hydro, remarked, "There doesn't seem to be an end to this tightness of alumina, not immediately." He added that new refineries expected to start operations in Indonesia and India would add more supply to the market.
According to the U.S. Geological Survey, global alumina supplies totaled 140 million metric tons last year, unchanged from the previous year. Additional supply is on the horizon, with over 13 million tons of new capacity expected to come online next year in China, as reported by Shanghai Metals Market (SMM).
In India, Vedanta plans to invest in an alumina plant with an annual capacity of 6 million tons by 2026. In Guinea, an arm of Emirates Global Aluminium intends to build a 2-million-ton-per-year alumina refinery, set to open in September 2026. Meanwhile, in Indonesia, two state-owned companies plan to double capacity at their refinery in West Kalimantan to 2 million tons, though no specific timeline has been provided.
Elevated alumina prices and higher profit margins are likely to further incentivize the utilization of China's existing capacity. SMM estimates China's alumina production capacity at 102.7 million tons, currently operating at a utilization rate of 83.6%. Analysts at China's state-backed research house Antaike noted that alumina producers have shown a strong commitment to maintaining high operating rates this year, motivated by favorable profit margins. However, they also warned that production could be affected by heavy pollution this winter, exacerbating supply tightness.
China's alumina exports from January to September rose by 33% compared to the same period last year, reaching 123.57 million tons. The average export price was $541 per ton, about 10% higher than prices on the Shanghai exchange over the same period. Some analysts are predicting lower alumina prices for 2025 due to a potential oversupply. UBS expects the average price to be 3,600 yuan per ton in 2025, while Antaike pegs it at 4,000 yuan per ton.
"We expect China's alumina market to step into a supply glut from February, and the price will slide as a result," said Sharon Ding, head of China basic materials at UBS. SMM anticipates that China's alumina market will shift from a deficit of 235,000 tons this year to a surplus of 960,000 tons in 2025. Globally, UBS expects a surplus of 890,000 tons in 2025, following a shortage of 920,000 tons in 2024.
This year’s alumina shortages have been driven by multiple factors, including Alcoa's closure of its Australian Kwinana refinery, which has an annual capacity of 2.19 million tons. Additionally, Rio Tinto declared force majeure on alumina from its Yarwun refinery in Queensland, Australia, which has an annual capacity of 3 million tons. Recent disruptions, including Alcoa halting bauxite shipments from Juruti Port in Brazil due to a stranded vessel and customs suspending exports by Guinea Alumina Corporation, have further fueled market uncertainty.
