Calcined alumina sellers see demand returning

By Davide Ghilotti
Published: Monday, 15 February 2021

Calcined alumina suppliers hope the recent increase in demand they have noted will prompt a rebound in prices later in the year.

Suppliers of specialty calcined alumina products have witnessed an improvement in demand for material from their customers, reversing a previous sluggish buying trend that had led to severe price falls for all grades during 2020.

In conversation with Fastmarkets in early January, at least three large-size producers spoke of "significant" changes in their volume of inquiries between the end of the fourth quarter of last year and the beginning of this year.

"We went from a situation of clear high availability across all products into the fourth quarter, and we approached negotiations knowing that we were long [on some grades]," one producer said. "But we’ve seen a change in tack when it comes to orders." 

"We have noticed an uptrend indeed, but from a low level. Whether this, or let's say a higher, consumption level becomes sustainable remains the essential question," a second supplier said.

Sellers speaking to Fastmarkets in recent months said they were aware that, against low demand, availability was more than sufficient to cover consumption, and inventory had been built up across the system. And with inquiries increasing against broadly unchanged production rates, these sellers hope this will lead to a progressive rundown of stock levels in the short term. This could then create better conditions for a recovery in market prices, sources said.

"As cost levels are not [expected] to decrease, suppliers may expect some higher prices later in the year if the [consumption recovery] remains in place," the second supplier added. Another producer spoke of "cost increases on logistics and feedstock," adding that "demand is very strong at the moment."

A third supplier said: "Demand is now higher from all markets, including batteries, ceramics and semiconductors, but mainly it’s refractories that is recovering after almost a year of absence. Our availability now is zero for the next two to three months."

Price falls
Market prices for calcined alumina materials fell heavily in the first half of 2020, when the effect of the Covid-19 pandemic on consumption worsened the oversupply situation that had first surfaced during 2019.

The prices of the three calcined alumina grades that Fastmarkets assesses fell by between 9% and 12% on average at the midpoint between January and July 2020. And the price fall is even greater when comparing those in July 2020 with the last time the market peaked in May 2019; over this period, prices have lost about 19% of their value at the midpoint.

The market mostly stabilized in the second half of last year. Fastmarkets’ monthly price assessment for alumina, calcined, unground, 98.5-99.5% Al2O3, bulk, exw US/Europe, long-term contract held at $600-700 per tonne on January 7, unchanged since August 6.

Similarly, the price assessment for alumina, calcined, ground, 98.5-99.5% Al2O3, bulk, exw US/Europe, long-term contract remained stable at $700-800 per tonne; and the price assessment for alumina, calcined, ground and unground, min 99.5% Al2O3, medium-soda min 0.25% soda, bulk, exw US/Europe, long-term contract held at $600-750 per tonne, following a $50 increase on the top end in December.

With the sharp downward move in 2020, prices have reached a low last reached in 2011-12, according to Fastmarkets’ historic price database. In other words, in a very short time the market lost all the gains it had raked in during 2016-19, a time of rising demand and insufficient availability.

Sources believe that part of the recent change in demand flow can be attributed to restocking. After several months of little or no orders from consumers that were working through inventory they had in-house, it is likely that some have now returned to the market to replenish and ensure they are covered to meet their 2021 consumption rates. 

This is said to be the case especially for Europe, where refractories producers tend to work with a relatively low level of inventory at plant. 

"The business model [for Europe] is to supply with short lead times, for them to manage the low inventory level," one distributor said.