Consumption of imported bauxite in Shanxi to increase
----Interview with Wenpeng Hou
Deputy General Manager
Shanxi Aokaida Chemical Co.
- Shanxi Aokaida Chemical Co., located in Xiaoyi, Shanxi, was set up in 2008 with the registration capital of RMB80 (USD11) million.The company covers a land area of over 66 acres with around 500 employees, including more than 100 specialists. Focusing on production of alumina and aluminum hydroxide, the company mainly cooperates with traders and delivers products to Xiaoyi and neighboring cities as well as those in Qinghai and Xinjiang, etc. In 2022, the company reported a sales revenue of around RMB1,053 (USD145) million with operating profits and net profits at RMB95.98 (USD13.18) million and RMB71.35 (USD9.8) million respectively.
- Asian Metal: Hello Mr. Hou, welcome to the interview and please introduce your company business briefly at first.
- Mr. Hou: Our company focuses on production of alumina and aluminum hydroxide. The alumina production capacity reached 900,000tpy in August this year, up from 500,000tpy and the aluminum hydroxide sales volume would reach around 30,000t this year. We target at almost 600,000t of alumina production this year, up from around 400,000t last year. Our new alumina production capacity has released since September with the monthly production volume surpassing 70,000t.
- Asian Metal: Where are Shanxi alumina products sold and how about the long-term and spot sales proportion? Will there be any change next year?
- Mr. Hou: Alumina from Shanxi mainly flows into Xinjiang, Qinghai and Inner Mongolia with Xinjiang and Qinghai accounting for over 60% altogether. Our long-term contract sales account for around 50% this year and the figure might reach 70% next year.
- Asian Metal: Over the past two years, many new alumina projects boomed in Guangxi. Will that challenge the alumina development in Shanxi?
- Mr. Hou: I think advantages in Shanxi will continue to exist. For instance, the cheaper freight for alumina and caustic soda to northwest China as well as the rich coal supply in Shanxi. The truck freight to Xinjiang from Shanxi is around RMB240/t (USD34/t), which is over RMB100/t (USD14/t) cheaper than that from Guangxi, despite the cheaper imported bauxite shipping freight in Guangxi. In addition, the imported bauxite land freight from Huanghua Port to Xiaoyi has reduced from RMB100/t (USD14/t) to around RMB70/t (USD10/t) since early this year.
- Asian Metal: Alumina prices moved down in China since early November. How do you think of the reasons and what is your forecast?
- Mr. Hou: As far as I know, in November the alumina prices dropped to below RMB3,000/t (USD420/t) EXW and recoreded RMB2,970/t (USD416/t) EXW which is on par with the long-term contract prices. Firstly, the alumina supply increased with around 100,000t of alumina inventories in Xinjiang released; Secondly, most alumina producers in Shanxi maintained normal operation this month and our plant runs fully now; Thirdly, aluminum smelters in Yunnan cut production in dry season, resulting in reduced demand for alumina; Lastly, the prices of caustic soda also dropped by over RMB500/t (USD70/t) to around RMB2,900/t (USD406/t) delivered in Shanxi this month. Therefore, I think the prices might go down continuously in the coming two weeks.
- Asian Metal: Over the past three years, many bauxite producers in Shanxi began fully or partially dependent on imported bauxite. What about your company? What are the advantages and disadvantages of imported bauxite?
- Mr. Hou: Due to the Chinese origin bauxite supply shortage, we fully shifted to imported bauxite since the second half of last year. Our imported bauxite consumption increased to 200,000tpm from 130,000tpm after the new alumina project was put into operation in August this year. There are many advantages. Firstly, by using imported bauxite, the unit caustic soda consumption volume could slip to around 70kg, versus 180kg by using Chinese origin bauxite. Secondly, the imported bauxite supply is much more stable than Chinese origin bauxite supply. In addition, the imported tri-hydrate bauxite saves energy consumption, which only requests 140℃ for alumina dissolving temperature, while Chinese origin bauxite requires 240℃. Talking about the disadvantages, imported bauxite will discharge almost 2t of red mud during per ton of alumina production compared with 1.5t by Chinese origin bauxite.
- Asian Metal: How about the consumption proportion of imported and Chinese origin bauxite in Shanxi now? Will the imported bauxite proporation increase in the coming three years?
- Mr. Hou: So far as I know, the average consumption proportion of imported bauxite has reached over 50% in Shanxi and I think the figure will keep rising to around 70% in the coming three years as Chinese origin bauxite mining remains under strict restriction.
- Asian Metal: What is your purchase demand and plan for imported bauxite in 2024?
- Mr. Hou: Given the unit consumption of 3t by imported bauxite, our alumina production capacity of 900,000tpy would request around 2.7 million tonnes of imported bauxite next year. Considering the normal inventories, we plan to order 3-3.5 million tonnes of imported bauxite in 2024 and will focus on Guinean bauxite by long-term contracts which might account for around 2 million tonnes at least. For the rest, we would consider purchasing bauxite from some alternative countries on spot market.
- Asian Metal: Wish your company's production and sales better and better!
- Mr. Hou: Thanks.
