ALUMINIUM
Seaborne Bauxite
April 2019
Seaborne bauxite, related to China’s huge aluminium demand, has seen an increase of over 200% in volume over the last decade. With continued bauxite mine developments in Guinea, and to underpin the major developments in Australia and continued offtakes from Australia and South America, AME expect imports to China to continue to increase to support coastal and near coastal refinery developments. Chinese alumina producers may continue to exploit this pathway of raw material supply, while shipping costs remain near multi-decade lows and domestic bauxite sources degrade in quality.

China’s Southeast Asian Bauxite Imports

The seaborne bauxite trade has increased over the last decade as China’s primary aluminium industry has expanded, fuelling growing demand for the raw ore. However, bauxite remains a significantly smaller contributor to the total raw material import in China than the other major bulk commodities of iron ore, and coal, both thermal and metallurgical.

 

 

Compared with the price of iron ore (~US$90/t CFR), and coal (thermal ~US$65/t CFR, metallurgical around ~US$205/t CFR), bauxite has a lower value of around ~US$50/t CFR.

As such, the seaborne freight cost is a major determinant in the viability of importing bauxite ore from other locations, offsetting the apparent savings in process cost compared to processing the domestic Chinese ore in the refining of alumina.

The fall in the Baltic Dry Index (BDI) to multi-decade lows following demand falls for the major commodities as well as significant increases in fleet sizes has improved the prospects of many deposits that may have initially been considered uneconomic due to freight distance.

 

 

 

The Bauxite Export Situation Regionally

Ignoring the sudden jump of bauxite import volumes to China in 2013 related to the impending Indonesian bauxite export ban, generally the seaborne bauxite market has seen a steady increasing trend. Combined with Chinese domestic bauxite showing a seasonal supply shortage and overall grades fading, indications are the seaborne market for bauxite will continue to increase in the short to medium-term.

 

 

Shandong province of China is the major consumer of imported bauxite, with eight alumina refineries using bauxite supplied to its two major import ports at Yantai Port and Qingdao Port.

Overall, Shandong province will continue to remain the major consumer of imported bauxite in China, consuming around 90% of the total import volume.

Chief consumer among the Shandong users is the China Hongqiao Group which is approaching 8Mtpa of primary aluminium capacity and has an associated ~15Mtpa alumina production capacity to be fed by imported bauxite.