Chinese domestic alumina prices are expected to see further support in the near term on the back market talk that the state environmental authority has clamped down on several major refiners and smelters this week, multiple market participants said Friday.
Talk was rife that at least two refineries in Shanxi province, including Chalco's 800,000 mt/year Huaxing plant, as well as one to two smelters in Shandong province, may have been told to shut or cut capacities.
Chalco sources could not be reached for comment Friday.
"If that's true, alumina prices will sky-rocket further. There's already transport issues and tight supply pushing prices up recently," a Western trader said. "But if a balanced amount of capacity is reduced from both smelters and refiners, then the impact will be less," the trader added.
Numerous Chinese refiners, traders and smelters said clearer details and verification were required before estimating market impact, as there was not yet any confirmed announcement on the move.
"The government can't just shut down big plants like that, the whole market will go into chaos," a Northeast China-based smelter said.
"No one here has shut anything yet, we just asked this morning and Chalco's plant is still producing. It's just a lot of talk. Even if the government wants to do something, there will be a period of negotiation," a Shanxi-based refiner said.
Clearer direction may be seen next week provided more details about the situation become available, sources said.
"No one can even be sure if smelters are affected, refineries are affected, or both. It also depends how much capacity will be affected, so we have to wait," a Chinese trader said.
On Friday, the Platts ex-works Shanxi daily alumina assessment stood at Yuan 2,820/mt ($410) full cash terms.
