China is the world's top aluminium producer and has been ramping up its output of alumina, the main material for primary aluminium production.
"Alumina prices are likely to rise gradually in the second half," said Yang Xiaoguang, analyst at Jinrui Futures, adding that he expected aluminium prices in China to remain strong in the second half and that would support alumina prices. Traders said speculators expecting higher Chinese alumina prices had built up stocks, cutting availability of the raw material in the spot market.
Aluminium prices spiked last week, up more than 3 percent highest weekly gain since February 2010 due to steady demand and speculation. The front-month of Shanghai aluminium, which reflect spot prices in China, hit 18,660 yuan ($2,900) on Monday, the highest level since August 2008, before closing at 18,560 yuan.
Jinrui's Yang said about 1 million tonnes of primary aluminium capacity was set to come onstream in the second half of this year, increasing alumina demand by about 2 million tonnes. He did not provide any details on new alumina capacity planned to come onstream during the same time.
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