What Is Alumina LME?

Alumina (or aluminium oxide) is an indispensable raw material in the production of aluminum metal and is produced from naturally occurring bauxite mineral.

Someone quickly identified a loophole in London Metal Exchange (LME)’s new sanctions on Russian metal, leading to cancellation of much of what entered warehouses this week and decreasing warranted inventories to their lowest levels since 2021.

Price

Aluminium is one of the world’s two most consumed metals and an integral component of daily devices we rely on, revered for its lightness, strength, corrosion resistance and ease of processing. Aluminum production facilities include Aluminum Corporation of China from China; Rio Tinto from Australia; UC Rusal in Russia; Xinfa in China and Norsk Hydro ASA from Norway – its major producers.

Price of Alumina Is Key Driver of Aluminum Market The CRU-API accurately represents the FOB Australia spot price of Alumina for publication each week, using only transaction data as inputs to its calculations ensuring it accurately represents actual spot market with no risk from sentiment analysis, unexecuted bids or offers being misrepresented as published prices.

CRU’s Global Aluminium Raw Materials Team provides comprehensive insights and forecasts into bauxite and alumina markets, such as pricing, supply analysis, demand analysis, cost assessments for major raw material consumers worldwide and much more. In 1978 we entered into an official partnership agreement with London Metal Exchange by adding aluminium as one of our traded commodities – and our long-standing partnership remains strong today!

Alumina prices have seen a recent upswing, as Chinese imports come under strain and domestic manufacturers grapple with weaker-than-anticipated economic growth and increasing raw material costs; even though alumina remains significantly cheaper than copper or nickel prices.

However, the market remains vulnerable to further price spikes as availability concerns continue to arise. Shanghai Alumina Contract has already increased by 30% since January 1 and hit its high on January 3, reaching 3,838 Yuan per Tonne due to security fears in Guinea where one of the largest bauxite reserves in the world are located – this prompted LME three month aluminium prices to surge above $2400/T last Monday as a result of these events.

Supply

Aluminium is an extremely versatile metal, used in aerospace applications and automobiles to reduce weight, packaging, railroad cars and construction materials. Alcoa and UC Rusal of Russia, Rio Tinto from Australia, Xinfa from China and Norsk Hydro ASA of Norway are major producers of this metal; Australia and Guinea possess some of the world’s largest reserves of bauxite (the raw material for aluminum production). Furthermore, London Metal Exchange (LME) offers futures contracts to allow market participants to hedge against potential price changes of aluminum production.

LME aluminium premiums have been shaken by Guinea’s unfolding crisis and supply concerns have intensified as a result. While risk of disruption to bauxite supply has subsided somewhat, the market remains highly responsive to any developments there.

Thus far, visible inventories at LME warehouses have decreased substantially when Russia is excluded. This trend should continue as the UK imposes sanctions that prohibit buying, importing and selling Russian base metals such as aluminium – an action which will have global ramifications that widens the gap between LME and Shanghai markets resulting in higher prices in Western countries.

As the price of aluminium and alumina are closely interlinked, any tightening in alumina market supply is likely to lead to an increase in LME three-month aluminium prices – however the size of inventory draws down depends on warehousing arrangements as well. Trading firms and warehousers quickly discovered ways to manipulate the London Metal Exchange (LME)’s complex load-out queue system for loadout queues, in order to take advantage of governments’ interest in seeing new sanctions enforced without market distortions. It became quickly evident how easily traders and warehousers could exploit its rules to their own benefit, creating high risk situations for governments that wanted new sanctions enforced without market distortions. But everything will likely turn out in the end as long as rules are followed. Revaluation of warehouse rules that prohibit traders from cancelling or transferring warrants within their warehouse should reduce how often this practice occurs, thus decreasing metal deliveries to exchanges while simultaneously increasing demand for existing stock.

Demand

Aluminium production requires considerable energy consumption and electricity rates are directly tied to demand; consequently, demand has become closely connected with both global power prices and weather patterns. Due to these factors, the aluminium industry has experienced supply constraints this year due to factors like drought in China’s Yunnan province; which accounts for 12% of its total aluminium output with hydro power production being particularly dependent upon rainfall conditions.

Due to lack of rain, China issued an orange drought alert in Guizhou province and cut electricity supplies, forcing smelters to reduce production while production growth in this sector has also seen slowdowns. Furthermore, hydropower cuts have had an adverse impact on steel production which is expected to drop significantly this year as raw material shortages hinder growth.

Aluminium prices have experienced a marked decrease since hitting an all-time record high in March. But the outlook for aluminium appears positive: in a pricing analysis conducted on January 8, S&P Global Market Intelligence noted that, despite an initial slow start to 2024, aluminum prices should stay flat through Q1 and perhaps increase slightly by Q2. According to S&P’s calculations, this rebound could be driven by industrial production activity increasing again.

Due to supply constraints, the price of alumina lme has increased steadily but has yet to surpass production costs, which has caused its premium to dip to two-month low levels as investors fret over future availability.

The premium quoted over cash aluminium prices varies by location has declined to $20 a tonne from $50 on Friday, reflecting growing concern that LME aluminium supplies could run short next year. Market participants remain concerned over potential UK sanctions against Russian metals as well as limited activity on China’s spot market; all this has led to slower movement from warehouses into spot markets and an overhang of stockpiles in LME-registered warehouses.

Storage

Aluminum is an abundantly used material in consumer products ranging from soda cans to car components, while also playing an essential role in industries like mining, manufacturing and aerospace. Aluminum naturally occurs as cryolite or the rock bauxite but must first undergo several chemical processes before becoming available as foil packaging or food containers.

Aluminum markets are complex and unpredictable, which makes it essential to understand how alumina lme price is determined. There are various resources available to you in order to help learn about this essential commodity; remembering that its price depends on supply and demand rather than speculation is particularly key here; one such source is the Alumina LME Price Index which displays average alumina prices from all of the world’s main producing regions and countries.

Alumina (Al2O3) is an aluminium(III) oxide with the formula Al2O3. It’s a brownish-white solid with an extremely high melting point that finds many uses in manufacturing refractories, ceramics, polishing, abrasive applications and fire retardants; in glass production as fireproofing agents. Alumina also serves as an important abrasive for steel manufacturers as well as having applications across metallurgy and chemistry applications.

Global demand for alumina production is rising, but a variety of factors could be hindering production. Smelting issues have arisen as energy costs increase, while cost of bauxite mining increases due to rising energy expenses, while prices of alumina increase due to shortages from China.

There are various methods of transporting alumina. Trucks are the go-to solution for short distance transport while rail is used for longer journeys and ships can transport large volumes.

Alumina is a hard metal with unique properties, such as low electric conductivity and extreme strength. Additionally, its resistance to corrosion allows it to withstand temperatures across a broad spectrum – all hallmarks of durability in aluminum production processes. It plays an integral part of this production cycle.

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