Reuters reported that Aluminium smelters in China have agreed on higher ratios of metal prices next year to value purchases of the raw material alumina spurred by worries of tighter supply at home.
Traders and sources at smelters said that deals for 2013 alumina imports were set at about 16.1% to 16.3% of London Metal Exchange aluminium prices, free on board, higher than the 15.2% to 15.5% paid in 2012.
Those percentages translate into prices of alumina. For example, the rate of 16.1 percent of Thursday's LME aluminium price of $2,133.5 per tonne would work out to a price of $343.5 per tonne of alumina, FOB.
Sources at smelters said that Chinese smelters also accepted higher ratios in recent weeks when LME aluminium prices fell below USD 2,000 per tonne giving smelters the opportunity to lock in prices for shipments.
A purchasing manager at a large smelter said that "Smelters cannot rely on domestic supplies anymore. The expansion of alumina capacity is slower than smelting capacity. If the newly built capacity in Xinjiang starts production next year, the supply would get even tighter.
The remote northwestern province of Xinjiang is a rising power house in China's aluminium industry and is expected to account for more than 10 million tonnes of capacity by 2015 about double that of Henan province now the top metal producer.