The alumina market which has been in structural overcapacity since 2007 will stay this way for the foreseeable future, Trafigura’s head of non-ferrous and bulk commodities Simon Collins said in the trading company’s first publically available report.
A general lack of volatility restricted trading opportunities during the year, he said adding that the overcapacity will continue to keep the market challenging for some time.
"Oversupply drove down domestic prices in China and alumina imports fell by more than a third." China accounts for 50 percent of global alumina production, but remains a net importer due to the country’s expansion in smelting capacity.
The alumina market has undergone structural changes in the past three years and "producers now price longer-term contracts off an agreed index based on the spot market at the time of delivery rather than as a percentage of the aluminum price," Collins said. This change has shifted price risk exposure from alumina producers to smelters, he added.
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