London: U.K, Aug. 21, 2019 (GLOBE NEWSWIRE) -- Declining high-grade reserves and falling capacity in China
One of the main problems in China is the historical misuse of reserves. Small-scale (often illegal) mining has often made use of higher priced, high grade reserves first, at the expense of lower grade material in a deposit and many such mines have since closed. These high-grade depleted deposits are no longer economical to exploit, especially if taken over by larger producers. State-owned Chalco, for example, has been reported to be unable to supply sufficient quantities of selectively-mined high grade ores in the recent past.
Environmental shutdowns have resulted in rising prices
Like many other industries in China, non-metallurgical bauxite and alumina has suffered from environmental shutdowns for a number of years, which has resulted in temporary periods of high prices. Bauxite prices peaked in early 2018 and, after some falls, rose again in early-2019 following sudden environmental shutdowns in Shanxi province. By July 2019, bauxite prices had seen some downwards readjustment but remained at elevated levels. Sluggish demand for calcined bauxite has kept prices down. The price of brown fused alumina, however, which uses calcined bauxite as its feedstock, has risen through the first half of 2019 to a level that is on a par, or even higher priced, than white fused alumina (based on calcined alumina); white fused alumina is more expensive under normal circumstances.
Environmental restrictions continue to shape the industry
In Shanxi province, which is the main area of bauxite production by rotary kiln, almost all production remains suspended as a result of environmental controls. In May 2019 Xinfa Group, one of China’s largest aluminium smelters, was forced to close all production lines at its alumina refinery in Jiaokou, Shanxi following state-run CCTV reports of a Shanxi unit of Xinfa dumping red mud (a toxic by-product of the process that refines alumina from bauxite) in Xiaoyi City. The resulting environmental shutdowns were so extreme that all bauxite mines were closed and there was a period of no raw material bauxite availability for any use in Shanxi Province. All the industry’s rotary kilns in the Xiaoyi area were also closed and it was very difficult to get +85% grade bauxite in China.
Meanwhile, the only remaining mine in Xiaoyi supplying bauxite suitable for calcining has been rumoured to soon be closing as a result of exhaustion of reserves. It is unclear whether a new mine has received the required permissions to open.
Alumina prices have also been affected but to a lesser extent since alumina supply is from a much wider range of international sources. During early 2019, prices for alumina were still suffering from the perfect storm of 2018, with the forced, partial closure of Alunorte in Brazil, threat of US sanctions against Rusal, and a strike in Australia influencing spot prices. All of these threats have since dissipated and alumina index prices have now returned to values seen before the issues of 2018.
Concerns may be tempered, to some extent, by slow bauxite demand growth
The refractories sector is the largest consumer of high-grade calcined bauxite and an important application for most bauxite and alumina products. Refractory demand is growing slowly with steel markets forecast to remain weak over the next decade and Chinese crude steel production expected to decline from 2022. There is, however, a general move towards the use of higher quantities of alumina refractories for steel production, especially in China, with the desire to prolong working lives for steel and other vessels as well as to help produce cleaner steels. With no decline in demand likely, constricting supply is expected to result in further market tightness.
For the short term at least, considerable concerns remain about both the quantity and quality of bauxite reserves and whether those that remain will be able to be mined and processed under the increasingly strict system of environmental restrictions. With demand continuing for high grade raw material bauxite, calcined bauxite, and alumina products, an understanding of the on-going situation in China will become ever more important to assesing the future of global markets.
The 10th edition of the Roskill’s Non-metallurgical Bauxite & Alumina: Outlook to 2029 report will be published in August 2019 and provide detailed analysis of supply, demand, trade, prices, producers and end use markets. The report will focus on future trends in China and their potential impact on global markets and look to shed light on the sometimes, intricate flow of material through the non-metallurgical bauxite and alumina supply chain. To discuss the new report with Roskill, contact Suzanne Shaw.
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