Calcined alumina prices for 2019 contracts have settled at higher levels than last year due to continued strong demand from the refractories sector, although participants report market tightness is expected to ease.

Finished steel shipments in January are higher both annually and since December.

Chinese finished steel exports increased in January on both a yearly and month on month basis with buyers able to secure favorable deals due to lower prices in China’s domestic market.

The country shipped 6.19 million tonnes of finished steel out of the country last month, up 33.3% from an adjusted 4.64 million tonnes in January 2018, according to preliminary Chinese customs data released on Thursday February 14.

Last month’s shipments were also 11.3% higher than the 5.56 million tonnes of finished steel exported in December.
Fastmarkets’ fob China HRC Index, for instance, averaged about $497 per tonne fob between November 1 and December 15, when the orders for most January-shipment materials were taken, down $70 per tonne from $567 per tonne during the corresponding period a year earlier.

Even though steel prices have fallen, due to the significant year-on-year rise in volumes, this January’s finished steel exports were worth about 35.12 billion yuan ($5.19 billion), up 25.2% from 28.04 billion yuan in January 2018.

Markets saw a second consecutive round of contract price increases for calcined alumina material, but a change in feedstock costs dynamics and availability could soften the market later in the year.

Calcined alumina prices for 2019 contracts have settled at higher levels than last year due to continued strong demand from the refractories sector, although participants report market tightness is expected to ease.

Following a prolonged period of contract negotiations that lasted for most of the fourth quarter of 2018 and, in some cases, into January and February of this year, agreements signed so far still show an appreciation trend, although some market participants foresee stabilizing elements taking hold.

On average, Fastmarkets IM’s 2019 contract prices for calcined alumina – including both ground and unground material – are 5-6% higher than in early 2018, confirming a bullish trend highlighted during negotiation phase last quarter.

Fastmarkets IM assessed the price for unground calcined alumina for 2019 contracts at $750-850 per tonne ex-works Europe and the United States on Thursday February 7, against $780-830 per tonne the previous month and $730-780 per tonne at this time last year.

Meanwhile, Fastmarkets IM’s price assessment for ground calcined alumina, as well as medium-soda calcined alumina, remained stable at $860-1,000 per tonne ex-works for Europe and the US on Thursday, after increasing from $860-960 per tonne in December.

«We have increased all our selling prices [for 2019], by a range of 5-15% depending on previous [price] levels, specs and volumes,» one supplier said, much in agreement with comments made by other sellers.

Most customers in conversation with Fastmarkets IM acknowledged a varying range of higher prices for early 2019 contracts.

The range is due to to a number of factors, including a prolonged tightness that affected the calcined alumina market throughout 2018. Insufficient supply could not meet the growing levels of demand from the refractories market across the board, which for its part was undergoing a bullish phase.

At the same time, participants stress the shortage that was tangible across the market last year may be easing, citing improving supply conditions, adjusting demand and falling smelter grade alumina (SGA) prices.

Fastmarkets MB’s index for SGA was $365 per tonne fob Australia on February 7, compared with $428.75
on November 7, 2018.

Another tendency highlighted by both buyers and sellers is that stock levels at consuming companies
appear to be high, following strong buying during most of last year. This, in turn, is leading to a slower
contracting pattern in early 2019.

«The situation is not as tense as before. We can see that buyers’ warehouses are stocked. Probably,
during to the peak of the shortage, customers sourced as much as they could. Now they are more
relaxed,» a distributor said.

«We booked volumes for the first couple of quarters, in the hope that market conditions would improve in
the second part of the year,» a large refractories producer said.

Another buyer also said he had contracted for about six months, and that he was willing to consider
quarterly renewals rather than longer-term agreements to take advantage of potential bearishness.

A second importer said: «The supply chain has inventory sitting at origin, at port and with distributors, as
well as with customers. There is stock around, and this is visible. This may mean demand adjusting in the
second half.»

A third buyer commented: «We perceive availability across a number of raw materials is improving,»
adding that «panic» is receding.

Alumina hydrate: wider spread

Meanwhile for alumina hydrate (ATH), latest assessments for 2019 contracts seem to point to wider
spreads compared with previous levels.

Fastmarkets IM assessed 2019 contract prices for damp ATH, bulk, at $250-300 per tonne fob refinery on
February 7, compared with $280-300 per tonne previously.

Market participants have been watching this market carefully, as supply issues last year from the capacity
shutdown of Brazil’s Alunorte, as well as the sanctions against Russian supplier Rusal, disrupted trade
flows, both for feedstock such as SGA and for ATH.

The North American ATH market was mostly covered during 2018 on previous stockpiling, thus largely
avoiding any immediate shortage. For this year, hopes from buyers are that a gradual return to more
standard trade flows (if Alunorte returns online and the sanctions on Rusal are cancelled) could have a
softening effect on prices in the coming quarters.

The higher spread seen in the latest assessments is also reflecting the market’s differences between large
buyers, who historically have been on multi-annual contractual arrangements and with better negotiating
power, and smaller or newer customers, which may be in a less favorable negotiating position.

The market for calcined bauxite and fused alumina remained in a state of limbo at the beginning of the fourth quarter due to a conttinued lack of clarity over the extent of supply issues in China.

Market participants are facing hard questins about continuity of supply from China amid a slowdown in demand from consumers in Europe and other areas.

The andalusite market remains buoyant on refractories demand and ongoing issues with alternative raw materials such as Chinese bauxite, but participants are hopeful the ripple effects of the 2017 shortage may finally be coming to an end.

The andalusite prices have risen once again for contracts signed for 2019 supply, but market participants see tightness easing and expect fundamentals to progress towards stabilization.

Prices from all main origins have been contracted at a few percentage points above last year’s bulk of contract prices, as strong demand from the refractories sector continues to drive consumption.

This is the second consecutive year prices have increased.

Fastmarkets IM assessed the 2019 contract prices for andalusite, mininum 57% Al2O3, at €270-340 per tonne ($307-387) per tonne) fob South Africa on February 21. This compares with €260-320 per tonne for 2018 contracts.

As for the delivered Europe market, Fastmarkets IM assessed the 2019 contracts for andalusite, minimum 57% Al2O3, at €340-450 per tonne cif Europe, on February 21, compared with €390-430 per tonne cif Europe for 2018 contracts.

Andalusite prices can vary significantly depending on the volumes contracted, with large-volume buyers (taking anywhere between 4,000-6,000 tonnes per year) normally commanding prices that can be meaningfully lower than those achieved by buyers of smaller tonnages (1,000 tonnes or less).

For both price assessments, the low end of the range tends to represent larger-volume buyers, while the top end represents smaller-volume consumers.

Fastmarkets has a minimum tonnage of 1,000 tonnes for these price assessments, with no maximum.

As regards the cif Europe prices specifically, while the previous range – which for 2018 was €390-430 per tonne cif Europe – was mostly representative of mid- and small-sized volume trading, the current range has been expanded at both ends to additionally capture large volumes, with a view to better represent the bulk of international andalusite trading.

Prices tick upwards, improved output

The majority of market participants contacted by Fastmarkets agreed the market has appreciated by 4-5% at the low end up to 8-9% on the high end, this year, depending on specific trades and previous prices.

This has been confirmed by Fastmarkets IM’s fob South Africa price assessment, which marks an average 5.2% increase on previous levels.

The latest top end of the cif Europe range, at €450 per tonne, has appreciated by 5% on last year.
According to some sources, in a number of cases prices have risen by 15-20%, depending on previous
levels. And while assessments have not shown such a hike, it is possible some specific contracts may
have moved upwards by that amount and remained within the wider assessed range.

Supply conditions improved across the board during 2018, after a severe shortage seen in 2017. That
year – owing to weather-related problems cutting output in both South Africa and Peru – the global
market ended up short of material. Some estimates put the deficit at up to 30,000 tonnes, sources
told Fastmarkets IM at the time.

No such issues were seen last year, which instead generated «close to record» production output across
the main origins, sources told Fastmarkets IM.

According a pool of more than 10 market participants, global production in 2018 between South Africa,
France and Peru is estimated at 300,000-310,000 tonnes. This volume (especially the low end) excludes
any additional output from China, which is reputed to produce 10,000-15,000 tonnes, according to the
most conservative estimates.

Chinese production is normally aimed at serving the domestic market only, however, with the country
relying on imported material to fill any demand gaps.

On the demand side, the tightness apparent in the market in 2017 eased somewhat last year – although
not fully, due to some 2018 volumes being booked to cover outstanding 2017 contracts.

«Everyone oversold in 2017, and hardly anyone could meet the orders,» a market participant said, «so
those outstanding volumes were covered with last year’s production.»

This overlap has gone some way to redressing the market imbalance, although prices did pick up again
on strong demand from the refractories sector. And because andalusite is often sourced as alternative to
Chinese bauxite, the ongoing supply issues with that material have contributed to maintaining the trend.
Despite the price upticks this year, market participants are cautiously optimistic about the supply
demand balance.

«The market could stabilize between supply and demand this year if no production issues occur,» one
source said, largely echoing comments from others.

Fastmarkets IM is proposing to change the frequency of its andalusite price assessments from yearly to
quarterly, to capture any mid-year movements in the market. A separate pricing notice will be published
detailing the proposal.