Booming trend expected in China's demand for imported bauxite
----Interview with Kai Wang
Executive Director
Henan Zhengxin Win-Win Trade Co.
Henan Zhengxin Win-Win Trade Co. was established in July 2020 and is mainly engaged in the trading of bauxite, alumina, aluminum hydroxide, coal, chemical products and other industrial products. The company has stable production and sales channels, so they could provide customers with sufficient supply and high-quality products with convenient logistics services. In terms of bauxite, the company provides one-stop comprehensive services from mining, crushing and transportation.
Asian Metal: Welcome to join this interview. First of all, please briefly introduce your company business.
Mr. Wang: In terms of bauxite, our company could provide domestic one-stop comprehensive services from mining, crushing to transportation. We sold over 2 million tonnes of Chinese bauxite in 2023 and expect around 1.7 million tonnes in 2024.
Asian Metal: From the end of last year, China's domestic bauxite supply shrunk sharply, so what do you think are the main reasons for such decrease? Has the supply started recovering in mid 2024?
Mr. Wang: In October last year, the supply of Chinese bauxite began decreasing, and it is estimated that the volume reduced by about on third. One of the reasons is the environmental protection move in the Yellow River basin. And on the other hand, due to the coal mine accident in Shanxi late last year, the mine safety inspection becomes strict. At present, there is no obvious recovery shown up, as the mine repairing, acceptance and license approval go very slow. The supply recovers no more than 10% and the situation may not improve until October this year.
Asian Metal: Does your Chinese bauxite supply decrease in the first half of this year?
Mr. Wang: At present, we mainly digest the previous low-grade bauxite inventory with Al/Si=3.5, S 2%max. The overall sales volume in the first half of the year was about 900,000t, stable compared with the same period of last year, but the volume for high grade bauxite Al/Si=8.0 S 0.3%max accounted for up to 1/3, which could account for about 2/3 last year.
Asian Metal: In order to cope with the short Chinese bauxite supply, some domestic bauxite traders began purchasing imported bauxite. How about your bauxite import business?
Mr. Wang: We began importing bauxite from March last year. At the beginning, we only imported bauxite Al2O3 57%min SiO2 4%max from Turkey, but now we have expanded to Australia bauxite Al2O3 50%min SiO2 8%max and Indian bauxite Al2O3 48%min SiO2 5%. Our imported bauxite sales would reach over 1.5 million tonnes in 2024, including Turkey, Australia, Laos, Guinea and India, etc., more than 300,000t in 2023.
Asian Metal: Compared with Chinese bauxite, what are the advantages and disadvantages of imported bauxite? Which country do you prefer?
Mr. Wang: In terms of advantages, first of all, imported bauxite can effectively make up for the vacancy of domestic bauxite, and imported bauxite such as Turkish bauxite can mix with Chinese high-sulfur bauxite; in addition, during the alumina production, Chinese bauxite requests high caustic soda consumption, around 160-180kg, while the caustic soda consumption by using Australian and Turkish bauxite could reduce to 80-100kg. Regarding disadvantages, Turkish bauxite suffers high cost of transportation and it takes about 40 days for the delivery to China, in addition, vessels need to cross the Red Sea, so the supply is unstable. Guinean and Australian bauxite is more favored in terms of quality and stability; from the perspective of transportation, it only takes around 10 days from Australia to China, and low-temperature bauxite in Gove of Australia has high quality of Al2O3 51-52%, which could be applied in more alumina refineries.
Asian Metal: Compared with traders in coastal regions, what are the advantages for inland bauxite traders to import bauxite?
Mr. Wang: First of all, inland alumina refineries do not give up the domestic bauxite, so inland bauxite traders can flexibly switch between domestic bauxite and imported bauxite, and we also could mix bauxite to meet the diversified demand of inland alumina refineries; in addition, inland traders have longer relations with local alumina refineries; in addition to trading, we also participate in mining investment and could achieve seamless connection during bauxite production, transportation and crushing. For example, we have investment in 7 bauxite mines, with the total annual production capacity of 5 million tons, and four of them are in operation now.
Asian Metal: Due to the tight Chinese bauxite supply, prices rose significantly in the first half of the year. What is your opinion on the current bauxite price and forecast for the rest months of this year? Is there any benchmark for Chinese bauxite pricing? How about the quality change over the past three years?
Mr. Wang: At present, the price for Chinese bauxite Al/Si=5.0 could reach RMB600/t (USD80/t) Ex-VAT delivered in Henan, an increase of RMB50/t (USD7/t) compared with the beginning of the year. I think there is limited room for domestic bauxite prices to continue rising in the second half of the year, because many alumina producers could replace with imported bauxite. Chinese bauxite pricing generally refers to the price of bauxite Al/Si=5.0 Al2O3 58%min, with the bonus and penalty at around RMB8/t (USD1/t) for 0.1. In the past three years, the overall quality reduced, for example, Al2O3 requested 60%min three years ago.
Asian Metal: How do you forecast the price of imported bauxite from mainstream countries in the second half of the year? What are the reasons?
Mr. Wang: Compared with the beginning of the year, the current price of Guinean and Australian bauxite in China has risen by about USD8/dt, a record high level, for example, the price for Guinean bauxite Al2O3 45%min SiO2 3%max gets close to USD75/dt CIF China. As the supply of bauxite remains tight, if alumina prices maintain at RMB3,800-3,900/t (USD524-537/t) EXW, the price of imported bauxite is expected to rise by about USD1/dt in the second half of the year.
Asian Metal: Compared with last year, how much do alumina refineries in Shanxi and Henan rely on imported bauxite? How do you view the dependence in the second half?
Mr. Wang: Due to the tight supply of Chinese bauxite, more alumina refineries have increased the imported bauxite consumption share. For example, alumina refineries in Henan are currently dependent on imported bauxite as much as about 2/3, compared with 1/3 in the same period of last year. Due to the slow resumption of Chinese bauxite mining, the dependence on imported bauxite in the second half may continue to grow.
Asian Metal: Finally, wish your bauxite trading better performance in 2024!
