Recap 2016: Who moved the bauxite market and who shaped the industry?

With the growing demand for aluminium in the end user market and the growing aluminium production in Asian countries including China and the Middle East region, demand for bauxite grew manifold during 2016. Countries competed with each other to supply bauxite to China, the largest aluminium producer in the world.  Unregulated bauxite mining created havocs in a number of countries. On the other hand some countries took measure to regularise mining sector. Companies expanded bauxite mining operations, new projects came up and companies invested in mergers and acquisitions to capitalize on the growing demand.  Here is recap of the major happenings that took place in the bauxite industry during 2016.

Expansion, Merger and Acquisition

1. Mining giant Rio Tinto ¬remains committed to the $2.6 billion Amrun bauxite mine expansion near Weipa. And for that, the conglomerate has already awarded construction and shipping contracts to two different firms and the work is in full swing. Amrun plans an initial output of 22.8 million tonnes a year by 2019.

2. Alcoa World Alumina and Chemicals (AWAC) has secured multiple bauxite supply contracts valued at more than $350 million over the next two years. Under the contracts, the Company will supply bauxite to external customers from three of its global mines. The new contracts cover customers in China, Europe and Brazil.
 
3. In December, Alcoa World Alumina and Chemicals (AWAC) secured its first major third-party contract to supply approximately 400,000 bone dry metric tons (bdmt) of bauxite from its Huntly mine in Western Australia (WA), furthering Alcoa’s strategy to grow its third-party bauxite business.

4. UC RUSAL, a leading global aluminium producer, and the Republic of Guinea have signed an annex to the Dian-Dian concession agreement and also reached an agreement on resuming operations at the Friguia bauxite and alumina complex.

5. In June 2016, Emirates Global Aluminium (“EGA”) announced the construction of a major bauxite mine in the Republic of Guinea.  EGA announced it has received final approval from its Board of Directors to launch the first phase of the mine, to be managed through its subsidiary, Guinea Alumina Corporation (“GAC”). The project will develop an initial 12 million tonnes per annum (Mtpa) bauxite mine in the Republic of Guinea.

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In December, Emirates Global Aluminium announced the first bauxite bulk sample shipment from its Guinea mine to China from the port of Kamsar.  The shipment of 55,000 tonnes is an important milestone in EGA’s programme to unlock Chinese and other markets for Guinean bauxite.

6. Metro Mining Limited has signed a binding off-take agreement for China’s Xinfa Group to purchase around half the Bauxite Hills Project production for the first four years of operation. Bauxite Hills is located 95 km’s north of Weipa on Western Cape York. Metro forecasts production of up to 4 million tonnes per annum from Bauxite Hills, with a mine life of 13 years.

7. Metro Mining’s flagship Bauxite Hills Project, near Weipa received a number of financial grants throughout the year including one of $8.9 million from Greenstones.

8. In December, Finally, Metro Mining Limited won additional 57.3% of Gulf Alumina shares. Following the final settlement Metro Mining will hold 96% shares of Gulf Alumina.
 
9. Aluminum Corporation of China Limited (Chalco) signed an agreement with the government of Guizhou Province in September for an expansive bauxite-alumina integrated complex in the region, industry source reported.
 
10. Hydro announced through a press release in December that the company completed the acquisition of Vale's remaining shares in Mineração Paragominas S.A. (MPSA) to become the 100% stakeholder of the company.

11. International Finance Corporation, a member of the world Bank Group announced Wednesday that it is going to invest $200 million in the bauxite mining company Compagnie des Bauxites de Guinée in Guinea, to support 'broad-based growth' in the West African country

Market Trends

1. According to a new market research publication on global bauxite mining trends and outlook to 2020, the world bauxite reserves stood at 27.5 billion tonnes as of January 2016.
 
Guinea had the world’s largest reserves, with 7.4Bnt, accounting for 26.9 per cent of the global total, with most bauxite deposits located in the western and central part of the country. Australia held the second largest reserves at 6.2Bnt.

2. According to a recent report published in June, global bauxite ore production is set to experience solid growth driven by a robust project pipeline and reach 321.3 million tonnes (Mt) in 2020. The report states that the production will witness a compound annual growth rate (CAGR) of 3.1 per cent from 2016 to 2020.
 
The report explains that bauxite mining will flourish in the forecast period backed by key upcoming projects, as well as continued investments in smelting and processing. The leading bauxite producers include Australia, China, Brazil, Guinea and Jamaica. (june)

3. UC RUSAL, reported substantial growth in bauxite output in Q3 2016 as well as the first nine months. In Q3, 2016, bauxite output totaled 3,211 thousand tonnes which recorded an increase of 2.7% from the last quarter. During the first three quarters of 2016, bauxite output totaled 9,346 thousand tons recording a growth of 0.9% from the same period of 2015.

4. Despite a world-wide sluggish market in metal sector, India’s PSU Nalco has registered an impressive performance in the first half of 2016-17 fiscal. While bauxite mining was up by 23.6 percent at 35.08 lakh tonnes as compared to the same period of last fiscal. The National Aluminium Company Limited (Nalco) targets to produce 68.25 lakh tonnes of bauxite and 21.50 lakh tonnes of alumina from its mines and refinery unit at Damanjodi in Koraput district during the current fiscal year.

5. China imported 5.3 million tonnes of bauxite in January 2016, up 104.91 per cent from a year ago, but down 25.4 per cent from prior month, revealed data released by the China Customs. According to China's General Administration of Customs data released in August 2016, bauxite import of the country shrunk 27.43 per cent year-on-year to stand at 3.6 million tonnes in July 2016 and the same increased to 4.4 million in August. The country imported 4.47 million metric tonnes of bauxite in September, down 2.87 per cent from the corresponding period previous year but slightly more MOM.
 
In 2016, China's total bauxite import is estimated to reach about 60 million metric tonnes.

6. India's total output of bauxite shot up 35.5 per cent in June this year, compared to the same period previous year, said a Ministry of Mines release.

7. Bauxite prices in China have shown signs of rising in 2016. Rising alumina prices gave Chinese alumina producers incentive to restart idled capacity during July or bring online new capacity, boosting bauxite demand and prices.

8. China’s quest for bauxite for its aluminum smelters and alumina refineries promises to deliver a 15-year boom for exporters of bauxite, according to Rio Tinto Group, which is spending $1.9 billion to raise output.

China again: who would be the top bauxite supplier to China?

China’s hunger for bauxite continued to remain strong despite recording a drop YOY. Since the time Indonesia had imposed a ban on ore export two years back creating a sudden lull in the hyperactive export market for China, a number of countries came up to seize the market and provide an alternative source of bauxite for China. Australia took the first plunge and continued to export a large amount of bauxite to China. It was followed by Malaysia and the country continued to export to China till the Malaysian government imposed almost a yearly ban on the mining and export of bauxite effective January 2016 amid worries over its severe environmental impact. This again put Guinea and Australia back into the export market to China.

In 2016, Malaysia managed to ship about 20 million tonnes of bauxite to China to clear up the bauxite inventory. Guinea’s bauxite exports edged higher to an estimated 19.1 million tonnes. Australia remains the biggest winner in competing bauxite market share in China. Bauxite exports from Australia also took a leap to total at 23.2 million tonnes worth US$0.73 billion in 2016. Brazil’s bauxite export is estimated to go up by 5.5 per.

Reports indicate that Guinea will take over Australia’s position to become China’s main source of bauxite in 2017. China is looking at the West African nation as the safest supplier of bauxite for future after juggling through a number of sources in last two years to sustain their growing aluminium industry.

Mining rights, moratorium and trade restrictions

1. Following Indonesia’s footstep Malaysian government imposed a three-month ban on the mining and export of bauxite effective January 15 2016 after a dramatic boom in the mining and export of the mineral to China. The frantic pace at which bauxite mining was growing without any proper environmental rules and regulation created a sense of discontent among the locals leading to investigations on the matter and finally prompted the government to impose a ban. The moratorium extended to a full year till December 31, 2016. Again on December 22, Datuk Seri Dr Wan Junaidi Tuanku Jaafar, the natural resources and environment minister announced that bauxite mining ban is extended by another three months  effective from  31 December.

2. After a year of mining export ban, the Indonesian government has come up with a revised version of a regulation on coal and mineral resources activities in the country, which is likely to mark a change in the licensing regime bringing flexibility in mineral exports, as confirmed by Energy and Mineral Resources Ministry secretary in October.

3. Odisha’s Department of Steel & Mines granted the lease of Pottangi Bauxite Mines, in Koraput district of Odisha to Navaratna PSU National Aluminium Company Limited (NALCO) in June 2016 for a period of 50 years covering an area of about 4,295.
 
4. The Government of Odisha has come up to support Vedanta’s Lanjigarh alumina refinery which has closed down partially due to acute raw material crisis. The State government assured the company that they would provide bauxite to the refinery from the Kodingamali bauxite mines, owned by Odisha Mining Corporation (OMC).
 
5. On a recent development in December, senior officials of Nalco said that the firm would consider allow Vedanta to participate in its alumina tenders.  This will help Vedanta secure alumina for its smelters which are in need of alumina to run full capacity.
 
6. After the recently upgraded MMDR act, state governments in India have put 32 mines for auction in regular intervals throughout 2016 to regularise the mining situation and to make raw materials like coal, irone and bauxite available to the aluminium producers as well as other major metal makers.

The hunger for bauxite as a raw material would not cease to grow in recent times. China would not curtail its aluminium production and the GCC countries are already in the process of expanding their existing aluminium capacity and commissioning Greenfield projects.  This indicates a strong growth potential for the bauxite market in 2017. Countries like Guinea and Australia would play a significant role in the coming year. If mining irregularities and environmental and tribal issues are brought within control, India and Malaysia are expected to play their part in the global bauxite market.

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