China Alumina Report Industry Report, 2010

Alumina, extracted from bauxite, gets chiefly used in the production of aluminum (electrolytic aluminum). China abounds in bauxite resources spreading in Guangxi (26.9%), Henan (26.0%), Guizhou (24.3%) and Shanxi (13.7%), with the basic reserves in 2009 reaching 839 million tons. The output of alumina in China accumulated to 23.83 million tons in 2009, 99.0 percent of which was contributed by Henan, Shandong, Guangxi, Shanxi and Guizhou.

Meanwhile, the development of alumina in China is closely related to electrolytic aluminum when it comes to supply & demand and price.

1. Supply & Demand: the output of electrolytic aluminum exerts direct impact on the alumina market.

In general, about 1.98 tons of alumina are needed to produce one ton of electrolytic aluminum, thus the production scale of electrolytic aluminum determines the demand of alumina in a direct manner. In recent years, China has seen the expanding capacity of electrolytic aluminum which facilitates the rocketing demand for alumina in the market, causing the overcapacity of alumina subsequently. The capacity of alumina in 2006 was less than 2,000 tons, while it reached 26.53 million tons in 2007 and exceeded 30 million tons in 2008. Impacted by financial crisis, the growth rate of alumina capacity in 2009 dropped 25.3 percentage points from a year earlier. With the restart of electrolytic aluminum capacity at home in 2010, China’s alumina manufacturers are active in expanding their capacities, with the identified and newly-increased capacity expecting to reach 7.9 million tons by the end of the year.

2. Price Trend: the price of alumina fluctuates with the price of aluminum.

The long-term orders take a lion’s share for aluminum smelting factories in China. And the long-term contract price is decided based upon 16%-17% of 3-month aluminum price of Shanghai Futures Exchange. This causes that the alumina price strays away from its supply & demand and cost, but associates with the price of aluminum. Backed by favorable policy, the aluminum price climbed in China in 2009, which spurred the price hike of alumina price. Entering 2010, the alumina has taken a V-shape fluctuation following on the heels of down-up changes in the aluminum price in spite of the robust demand for alumina.

China Alumina Industry Report conducted by ResearchInChina, from the global viewpoint, focuses on the supply & demand, import & export and market price of alumina. Moreover, it at length studies the 14 key domestic enterprises, including CHINALCO, Shandong Nanshan Aluminum and Xinfa Group.

CHINALCO is a well-known leading manufacturer of alumina in China and the world. In 2009, the alumina output of the company reached 7.78 million tons, ranking the third place around the globe and topping in China. In June 2010, CHINALCO Zunyi put its 800,000-ton alumina project into production, and the 800,000-ton alumina project of its Chongqing branch also entered the stage of equipment debugging and plans to put into operation in 2010. By the end of 2010, the alumina capacity of CHINALCO is expected to increase to 13 million tons.

Apart from CHINALCO, Shandong Nanshan Aluminum is another enterprise with a complete aluminum industry chain, and it has the capacity of annually producing 1.2 million tons of alumina, 156,000 tons of electrolytic aluminum and 110,000 tons of industrial profiles. By bringing its advantages in cost and differentiation into full play, Shandong Nanashan Aluminum achieved the sales revenue of RMB7.279 billion in 2009 of which the revenue from alumina reached RMB1.633 billion with a share of 22.4% in company’s total revenue.

Since it set foot in the alumina field six years ago, Xinfa Group has made the leap-forward development, with the capacity soaring to 5 million tons in 2010 from 400,000 tons in 2004. Chiping Xinfa Huayu Alumina Co., Ltd, a company subordinated to Xinfa Group and established in 2007, performed even better. And Its phase-I project (including 2.4 million tons of alumina) put into operation at the end of 2008, and the phase-II project (including 800,000 tons of alumina) put into production in the second quarter of 2010.

Additionally, of the 14 enterprises in this report, the ones with alumina capacity exceeding one million tons also include Shandong Weiqiao Aluminium & Electricity, Shanxi Luneng Jinbei Aluminum, Guangxi Huayin Aluminum, Kaiman Aluminum and Donghai Aluminium.

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Helen Wang
Tel: 86-10-82600893
Fax: 86-10-82601570