Alumina Market Caught Between Political Unrest and Rising Demand

Published On : Nov 04, 2024

The global alumina market seems to be at a critical crossroads with ongoing supply chain interruptions brought on by geopolitical tensions and growing demand for aluminum. The price dynamics of alumina, the main raw material used to make aluminum, have a big influence on multiple industries, including packaging, automotive, and aerospace.

The supply chain's vulnerability has been brought to light by recent surges in alumina prices, especially given the operational difficulties faced by key exporters like Guinea. Aluminum recycling plays a significant role in determining the demand for alumina as industry practices become more sustainable.

Alumina Market Caught Between Political Unrest and Rising Demand

Profit Margins in China Under Pressure with Sky-high Alumina Prices

Significant price swings have lately occurred in the high-purity alumina market, with prices hitting all-time highs. Alumina spot prices in China reached an all-time high of Yuan 4,450 per metric ton as of mid-October 2023, as per recent reports.

Guinea, China's biggest supplier of bauxite was the main cause of the price surge, which rose by Yuan 460 per milligram ton from the previous month. This reflects a large pattern in which growing production costs due to geopolitical unrest and rising energy prices have an impact on market prices.

China's aluminum smelters are facing reduced profit margins due to their growing reliance on imported alumina. Despite these price surges, the November contract on the Shanghai Futures Exchange shows strong market sentiment by breaking a daily trading limit of 7%. Additionally, prices in Asia and Europe continue to remain high, which makes production more difficult for aluminum producers. This setting makes the industry less sensitive to outside influences like energy costs and geopolitical unrest.

Guinea Focuses on Improving Bauxite Exports while Europe Searches for New Sources

Geopolitical issues have a big impact on the alumina industry, especially the current situation in Guinea where customs officials have hindered bauxite exports. Guinea Alumina Corporation's (GAC) 2023 bauxite shipments have had repercussions across the supply chain. It mainly hampered those businesses that use the country’s bauxite to make alumina. Any interruptions in this supply chain might have a significant effect on the availability of alumina worldwide, as GAC exported nearly 14.1 million wet metric tons in 2023 alone.

Geopolitical tensions brought on by the conflict have resulted in high energy prices and European production hindrances. It has compelled industries to look for aluminum from other sources. In Europe, for instance, aluminum production dropped by 3.95% in 2023, according to the International Aluminum Institute, which may increase dependency on imported aluminum. To reduce risks and preserve profitability, businesses in the alumina industry must be flexible and sensitive to these outside forces.

Companies Aim for Aluminum Recycling to Reduce Reliance on Bauxite

Sustainability is becoming increasingly important as the field of alumina battles with growing expenses and supply chain issues. There is constant pressure on the aluminum industry to improve recycling and lower emissions.

Demand for virgin alumina made from bauxite will likely decline as aluminum recycling rates rise. Around 76% of aluminum was recycled globally in 2022, according to the International Aluminum Institute. This percentage is expected to surge as more effective recycling techniques are created. As aluminum recyclers reuse waste material rather than depending on alumina sourced from bauxite, the high amount of recycled aluminum lowers the need for smelter-grade alumina.

One of the biggest aluminum recyclers in the world, Novelis Inc., for instance, recently announced significant expenditures on its recycling facilities. This also includes the development of a new recycling facility in Kentucky. Demand for virgin alumina is projected to be greatly reduced by this facility. It is anticipated to process more than 600 million pounds of recovered aluminum yearly.

Alumina Trihydrate Faces Declining Demand in Pharmaceutical Industry

High-end Alumina Trihydrate (ATH) products, such as fine-particle ATH used in technical ceramics, papermaking, and pharmaceutical coatings, are affected by rising alumina prices. As fine ATH needs a pure alumina input, these products are susceptible to hikes in the price of alumina.

Drug manufacturers who employ pharmaceutical-grade ATH as a binder or filler have been impacted by the 10 to 12% increase in cost over the past year. Price hikes for flame-retardant coatings used in building materials have also squeezed profits for manufacturers in North America and the European Union (EU).

Top 5 Alumina Companies in 2024 to Look Out for

1. Alcoa Corporation

Headquartered in Pennsylvania, Alcoa Corporation is considered one of the largest producers of alumina in the world. Founded in 1888, the company has been providing its number one alumina brand to the world, i.e. EcoSource. It owns a total of six refineries in Spain, Brazil, and Australia. It produces approximately 17 million metric tons of alumina every year.

2. South32 Limited

Australia-based South32 was founded in 2015 by Graham Kerr. It engages in bauxite mining and alumina refining operations in Australia and Brazil, while its aluminum production facilities are located in South Africa, Mozambique, and Brazil. The company owns nearly 86% of Worsley alumina, with 10% possessed by Japan Alumina Associates (Australia) Pty Ltd.

3. Norsk Hydro ASA

Norway-based Norsk Hydro, is a leading renewable energy and aluminum company. The largest alumina refinery in the world, Hydro Alunorte in Brazil, is where the company makes alumina. While the majority of this is sold to other businesses, some of it serves as the basis for Norsk Hydro’s own aluminum production.

4. United Company RUSAL

Commonly known as RUSAL, the company was founded in 2007 by Oleg Deripaska in Russia. The primary product of the company's refineries is G-00 smelter-grade alumina, which is composed of nepheline ore and bauxites. The final, superior product meets all GOST 30558-98 standards.

5. Aluminum Corporation of China Limited (Chinalco)

China’s leading alumina producer Chinalco was founded in 2001. Alumina is a significant component of the company's non-ferrous metal production, trading, and distribution activities. It has recently started using ‘flexible production’ techniques to adapt to changing market conditions, including short-term output reductions at alumina operations in Shanxi province.

Leading Players to Invest in Sustainable Manufacturing in the Future

Though the alumina industry is currently facing the challenges of geopolitical tensions and high energy costs, new opportunities are anticipated in the next ten years. The increasing focus of key players on renewable energy and sustainable manufacturing is projected to augment innovations in alumina production processes. The emergence of energy-efficient smelting and low-carbon refining techniques is likely to provide new growth avenues.

Surging sales and production of Electric Vehicles (EVs) is another key factor expected to accelerate demand for High-Purity Alumina (HPA). Renowned companies are estimated to invest in circular economy practices, regional diversification, and innovation to strengthen their position worldwide.

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