We are bullish on the Chinese bauxite demand and Indian Bauxite is a reliable source of supply to China in the long-run
----Interview with Mr. Chetan Shah, Chairman of Ashapura Minechem Ltd.
- Ashapura has more than 6 decades of experience in mining, mineral processing and logistics and has multi-mineral operations spread out all across the globe and are well placed to leverage our expertise in exciting regions such as Guinea. They will continue to enhance their global resource base and add value to their customers, stakeholders and local communities over the years. They intend to be the largest multi-region exporters of quality bauxite to China within the next 5 years.
- Asian Metal: Based on China Customs, China imported around 630,000t of bauxite from India in Q1, 2017, down by 73.6% YOY. How do you think of the reason for the sharp decline?
- Chetan Shah: Weiqiao was a major importer of Bauxite from India, we understand that they have acquired captive Bauxite resources in Guinea which they are now using instead of Indian Bauxite.
- Asian Metal: How many tonnes of bauxite did Ashapura export to China during the period?
- Chetan Shah: ~550,000 MT in Q-1, 2017 (i.e. January 01, 2017 to March 31, 2017).
- Asian Metal: According to the figure, the Guinean bauxite supply reached around 4.8 million tonnes in Q1, up by 185.6% YOY. Will that continue to rise?
- Chetan Shah: Indeed it is likely to rise, here again the major importer of Bauxite from Guinea would be Weiqiao. It is estimated that this year China will import approx. 15-20 million MT of Bauxite from Guinea.
- Asian Metal: Compared to Guinean bauxite, what is the advantage for Indian bauxite? Will major Chinese consumers resume Indian bauxite import?
- Chetan Shah: The quality of Bauxite from select regions of Guinean is marginally superior as compared Indian Bauxite in terms of high alumina and low silica content. Indian Bauxite is a reliable source of supply to China in the long-run at both high and low levels of ocean freight.
- Asian Metal: How many tonnes of bauxite did Ashapura produce in 2016? How do you expect the figure in 2017? And how about the annual capacity?
- Chetan Shah: Ashapura’s annual capacity is ~10 million tons per annum and can be extended ~15 million ton per annum. In 2016, Ashapura sold about 4.3 million tons of Bauxite, in 2017 we expect ~7 million ton as compared to the previous year.
- Asian Metal: Since early this year, the freight cost increased further. Bauxite prices from India, Malaysia and Brazil climbed up. Do you think the price will continue to go up in Q2?
- Chetan Shah: FOB prices of Bauxite have been fairly stable, however the movement of other commodities such as iron ore etc. end-up making freight rates dearer. We understand that many of the importers have insulated themselves from freight risk by entering into long-term CIF contracts with Bauxite sellers.
- Asian Metal: It is reported that Ashapura also has bauxite investment in Guinea. Could you please give a brief introduction? For example, the reserves, quality, budget and infrastructure, etc.
- Chetan Shah: Ashapura has acquired mining rights over 40,000 heactor of Bauxite bearing land near Boffa, close to the Fatala river. We are already in the process of evaluating the reserves and their quality, and the preliminary results are encouraging. We shall be creating all the ancillary infrastructure for the mining, transportation and port operations for the export of Bauxite.
- Asian Metal: When will you be able to export Guinean bauxite? How about the monthly capacity? Will you consider finding other investment partners to join the project?
- Chetan Shah: We expect to commence mining by December 2017 and shipments by around April 2018. In the first year of operations we are targeting 3 million tons which we expect to sustainably scale up to 7-8 million tons per annum within 5 years. We are in process of signing long term contract with Chinese end user shortly.
- Asian Metal: Based on Asian Metal database, Chinese consumption demand for imported bauxite reached around 5.8 million tonnes in March 2017, up by 41.9% YOY. Do you think the demand will continue to rise?
- Chetan Shah: We are bullish on the Chinese Bauxite demand, in 2016 alone China imported nearly 52 million tons of Bauxite, in 2017 these imports are likely to breach 65 million tons. Furthermore, we understand that several new refineries are comping up in the Shandong province, so we believe that this demand is sustainable.
- Asian Metal: In the long term, what kind of challenges will Guinean bauxite face? What is your opinion?
- Chetan Shah: Eventually if Bauxite exports from Guinea rise rapidly, it would all depend on whether all of the miners are in a position to adopt environmentally sustainable practices like Ashapura. We have seen in certain regions of the world where rapid and irresponsible mining has adversely affected local communities and their quality of life.
- At times governments could also be inclined to value add the Bauxite in the country of its origin rather than encouraging export of raw ore.
- Asian Metal: Antam got 850,000t of bauxite export quota late March and Indonesia will resume bauxite export gradually. Will that affect other bauxite supply?
- Chetan Shah: 850,000 MT is merely a drop in ocean so far as the Chinese demand is concerned. Resumption at this scale is unlikely to dent Bauxite supply from other regions. Whimsical government policies in erstwhile large Bauxite exporting countries such as India, Malaysia and Indonesia have compelled Chinese importers to look beyond their back-yard into far off regions like Guinea.
