Chinese spot alumina prices slipped further Friday on the back of a surge in lower offers from traders this week.
The Platts China ex-works Shanxi daily spot alumina assessment closed the week at Yuan 3,750/mt ($568/mt) cash, dropping Yuan 30/mt from Thursday, after falling Yuan 20/mt on November 1.
The current price also reflected a decline of Yuan 50/mt on the week, and was down Yuan 100/mt from the start of October.
Offers from traders have been heard at a wide ranging Yuan 3,650-3,750/mt ex-works basis in the past week, while refiners continued to quote at Yuan 3,800-3,850/mt cash.
Market talk is rife that traders are now holding an estimated 700,000 mt to 1 million mt of spot alumina stocks, and are desperate to sell, as warehouse and financing costs weighed down on them, sources said.
Smelters have also been holding back spot purchases, relying on mainly term contracts, as they await clearer direction from the upcoming winter cuts.
"It's risky and costly for traders to hold stocks for long periods, and smelters have not been buying recently, so they have to try and sell at lower prices now," a Chinese trader said.
"No trader can hold stocks for more than three months, warehouse and finance costs are too high. We've also received low offers but we can wait, as we believe prices can still lower in the near term," a Xinjiang smelter said.
Two Chinese refiners agreed, adding that market expectation now was that alumina prices would likely test lower until the planned winter cuts kick in mid-November.
"Once the cuts happen, then prices will likely rebound ... and if Luliang really cut as well, then there will be even more support for alumina," a Shanxi refiner said.
Luliang in Shanxi province is a region that was recently included into the planned 2+26 winter cuts, with an estimated 12-13 million mt/year of alumina capacity.
Market participants hold mixed views currently on Luliang, as there's been no firm details about the potential cuts in the region.
"We must also see how domestic metal prices fare after the cuts, as metal prices have been relatively low in comparison to alumina prices recently," a Henan refiner said.
On Friday, the front-month primary aluminum contract on the Shanghai Futures Exchange closed at Yuan 16,055 mt, down from Yuan 16,175/mt last week, and also from Yuan 16,465/mt at the start of October.
