Alumina

Alumina Regional Market Outlook

• The Asia Pacific region will continue to dominate the market, in terms of growth prospects in the forecasted region, owing to rising demand for metallurgical-grade alumina (aluminum production) and chemical-grade alumina, especially from China, due to high consumption from industries, such as refractories, ceramics, and abrasives

• Metallurgical-grade alumina primarily used for aluminum production reported the largest market share in 2020, owing to growing consumption in other end users, such as automobile, construction, packaging, and consumer durables

• In the forecasted period, the alumina market is expected to witness a demand surge, especially for the metallurgical-grade alumina, due to growth of these downstream industries.

Impact of COVID-19 on Alumina Industry

• Engaging in the short-term contracts/partnerships with sourcing destinations, which started to recover from the impact of the pandemic (China, Brazil, India, Indonesia, Russia, etc.), will help to alleviate a certain degree of uncertainty in the market.

• Due to heavy rainfall in the Shanxi region, Xinfa Group closed its two operations line in Xiaoyi and Jiaokou with an annual alumina production capacity of 1.2 million tons and 800,000 tons, respectively

• Alumina refineries (Alumar and Jamalco) that were closed in July 2021, due to fire accidents have recently resumed production

• Subsequent waves of the pandemic in China, South Asia, and Europe have disrupted operations in the downstream industries, affecting alumina demand

Porter’s Five Forces Analysis on Alumina

Supplier Power

• Major alumina producers, such as Nalco, Hindalco, etc., are fully integrated with their own mines for key raw material, like bauxite, thereby having full control over supply
• Non-integrated and semi-integrated players depend upon the upstream producers for the raw material. Any underlying deficit in the bauxite raw material market, coupled with the relatively consolidated nature bauxite market, makes the supplier power high
• Thus, the non-integrated players constitute to only a small portion of the alumina industry. Hence, the bargaining power of suppliers is low to moderate

Barriers to New Entrants

• The need to control resources, given the deficit in the bauxite market, is expected to increase the barriers to new entrants
• High barrier to entry is also due to a combination of factors, like the requirement of large amount of capital, long gestation period, etc.
• High barriers to new entrants result in low threats for new entrants

Intensity of Rivalry

• Industry rivalry is medium, as handful manufacturers can manufacture certain calcined alumina grades with customized specifications and desired alumina content
• Due to the supply disruptions, COVID-19 pandemic, many small suppliers in China have merged to strengthen their financial as well as expand product portfolio for the long term

Threat of Substitutes

• In case of major end uses of calcined alumina, such as refractories, ceramics, abrasives, flame retardants, etc., only flame retardants are produced in large numbers from other materials
• About 40 percent of the total production of flame retardants is from materials other than calcined alumina. Therefore, the threat of substitutes is low to medium
• In case of brown-fused alumina during COVID-19 pandemic, demand from buyers was replaced by white-fused alumina on the account of low price

Buyer Power

• About 6 percent of the global alumina is reserved for non-metallurgical industrial applications
• In addition, switching from one supplier to another can increase the total procurement cost, especially in case of unprecedented situations, such as the COVID-19 pandemic
• Thus, buyer power for the non-metallurgical alumina sector is low to medium