Prices for spot alumina, the raw material for aluminium, have fallen 16 percent this month and more than 30 percent since May due to higher-than-expected production in China, industry officials said on Friday.
Falling prices of alumina discouraged Chinese smelters from importing the material and put pressure on the country's top alumina producer Aluminium Corp of China Ltd to cut prices.
Industry officials and analysts have predicted alumina production in China, the world's biggest buyer for the material, will rise as much as 51 percent to 13 million tonnes this year as high prices had attracted investment. But industry officials now see the production rising further to as much as 14 million tonnes this year, since more than 2 million tonnes of capacity are scheduled to come on stream in the second half.
"Our prediction now is 13.5 to 14 million tonnes. That only takes into account refineries we know about," an official for one aluminium smelter in the south said.
Weiqiao Aluminium in China's north-eastern Shandong province is expected to bring in more than 1 million tonnes of alumina capacity in the second half of this year, boosting its rate to 2 million tonnes, industry officials said. It is a subsidiary of Hong Kong-listed Weiqiao Textile Co Ltd.
Xinfa Aluminium Electricity Group in Shandong would gradually bring on stream 1.5 million tonnes in the second half, doubling its operation rates.
Spot locally produced alumina traded at 4,800 to 4,900 yuan a tonne, against 4,900 to 5,000 in the beginning of July. But prices still exceed refineries' cash production costs between 1,500 and 2,000 yuan a tonne, industry officials say.
Overseas suppliers have reduced their prices to $410 a tonne for delivery to Chinese ports, against $490 in early July and nearly $600 in May.
A Chinese firm was seeking imports at $380 a tonne.
Alumina already in Chinese ports was offered at 4,900 yuan a tonne, against 5,400 yuan in early July.
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