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Chinese aluminium smelters to keep low term alumina imports
China's aluminium smelters may keep imports of raw material alumina under yearly contracts low next year as prices rise and domestic production increases, industry sources said on Tuesday.
Term alumina to China for 2012 shipments is being indicated at about 15.5 to 16 percent of the price of primary aluminium on the London Metal Exchange after India's state-run National Aluminium Co Ltd sold 300,000 tonnes at about 16 percent last week.
Major Chinese importers have paid 14.8-15.5 percent for 2011 shipments of Australian alumina on a free-on-board basis versus 14.5-15 percent in 2010.
"Having considered the Nalco deal, alumina from Australia should be 15.5-15.6 percent," a trader at an international trading house said, of 2012 shipments from Australia, the most popular origin to Chinese smelters.
Chinese aluminium smelters have so far been unwilling to accept the proposed range and are seeking to import at 15 percent, the trader said.
"Major (Chinese) importers of alumina are unlikely to accept more than 15 percent. To us, any offers above 14.5 percent are too high," said a trading manager at a large aluminium smelter, which is also a large importer of alumina.
The trading manager said many smelters in China expected the country's supply and demand of alumina to be nearly in balance next year.
Alumina is the main raw material for the production of primary aluminium. About two tonnes of alumina are needed for one tonne of metal in China.
China's 46 million tonnes of yearly alumina capacity would produce 95 percent of the alumina needed domestically this year due to expanded capacity, state-backed research firm Antaike has predicted.
Some Chinese smelters needed to import alumina linked to metal-supplying contracts signed for good-quality Australian alumina and to multi-year term contracts signed in previous years.
But firm LME aluminium prices and increased yearly percentage for 2011 alumina shipments have prompted Chinese importers to resell large amounts of contracted imports due to arrive China to the international market in the past few months, smelter sources and traders said.
Smelter sources estimated more than 2 million tonnes of alumina had been resold so far this year.
The benchmark three-month LME aluminium prices dropped 5.48 percent from end-2010 to $2,334.75 per tonne on Tuesday in late Asian trade, the best performer among the base metals.
In the international market, spot Australian alumina traded at about $360-$365 a tonne on a free-on-board basis versus $360-$370 in late August and $410-$430 in late July-early August, traders said.
Spot alumina prices in China edged up to 2,850-2,950 yuan ($462) per tonne, from 2,750-2,900 yuan in early August and 2,550-2,650 yuan in early June. The prices were still lower than the cost of imports currently, traders said.
China's alumina production rose 19.3 percent on the year to 23.45 million tonnes in the first eight months of 2011, with June's output hitting a monthly record of 3.143 million tonnes.
Record domestic production contrasted with a 61.3 percent on year fall in imports to 1.11 million tonnes of alumina in the same period, with August's inflows reaching a monthly record low of 40,000 tonnes. ($1=6.387 yuan)
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