The Platts Australian alumina assessment fell 50 cents/mt from Friday to $315.50/mt FOB Monday, weighed down by supply overhang, tight cash flows and lack of buyers. Alumina bid/ask levels were around $310-312/mt against $316/mt FOB Australia.
The assessment was down $5.50/mt on the week, $8/mt on the month, and $18/mt from the start of the year.
In recent days, multiple consumer and trade participants reported turning down offers of Australian and western origin alumina for shipment in May, June, July and August. On Monday, a Chinese consumer/reseller reported rejecting an offer for an end-June Western Australian cargo made at $340/mt CIF China.
Suppliers were said to be sitting on global long positions, and approaching potential buyers with requests for time and origin swaps, sources said.
In addition, sellers have been substituting Australian-origin cargoes with parcels from the western regions in the fulfillment of term contracts, sources said. Supply pressure from the western world will inevitably free up more tonnes in the Asia Pacific region, putting further downward pressure on the Australian price, they added.
In an increasingly apparent buyers' market, a Western trader said buying interest has been weak and prospective buy ideas for Australian alumina remains "much lower than $316/mt FOB." He added that Chinese buyers had the option of readily available and affordable domestic alumina, and that offers for prompt Australian or Brazilian origin cargoes stood at $335-340/mt CIF China.
Meanwhile, consumer and trade sources added that Chinese buyers were in the sidelines as buying potential has been stymied by tight cash flows and limited access to credit.
"Even if the price is low, I can't buy [alumina]," a Chinese consumer/reseller said.
"Chinese banks are risk-adverse now, so it's very difficult for buyers to open letters of credit, which in turn hampers overall demand for alumina," the Western trader added.
The Platts China alumina assessment for Henan province was stable Monday at Yuan 2,430/mt ($394)ex-works for 70:30 cash and credit payment terms.
Henan's cash price for spot alumina was trading at mostly Yuan 2,400/mt Monday, but may break below that level in the near term depending on domestic aluminum levels, refiners and smelters agreed.
Traders may sell term contract material on a spot basis below Yuan 2,400/mt, refiner and smelter sources said. However, as traders have limited supply of alumina, these trades are not reflective of the market, they added.
Weak domestic aluminum prices have brought down alumina term contract prices across the country, which remained the main factor driving down spot alumina prices, market participants said.
On Monday, the front month June aluminum contract on the Shanghai Futures Exchange closed at Yuan 13,110/mt, down from Yuan 13,145/mt last week, and from Yuan 13,300/mt at the end of April.
China's term alumina contract prices for 2014 are typically priced at around 17% of the average aluminum contract price on the SHFE for three months.
