Outlook 2017: Awaiting opportunities in the bauxite sector

According to CRU, global alumina capacity is forecast to grow by 29.6% over the next ten years, reaching 179.6M tonnes by 2024. Metallurgical grade alumina capacity expansion, primarily in China will drive the growth in demand for bauxite. China's growing need for raw materials to feed its alumina refineries is expected to drive a 15-year boom for the top bauxite exporters like Australia and Guinea.

Which country will take away the top supply share?

The emergence of Malaysia as a strong bauxite supplier to China after Indonesia’s ore export ban faced some hurdles because of the export ban that had been imposed by Malaysian government in the beginning of 2016 and extended till March. It however, could not affect the growing need for new bauxite supply. CRU forecasts that the trihydrate bauxite market will once again return to deficit once Malaysian stockpiles are exhausted.

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Minerals export ban in Indonesian and Malaysia will drive quick growth for bauxite projects in various parts of South East Asia, Australia and Guinea. If Indonesia slowly lifts the ban on bauxite export in the coming year as announced on Jan and Malaysia comes back to picture after March 2017, they would again be in close contest as supplier to China. Currently, 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. 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.

Expansions and new projects

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 year 2017 will see a number of bauxite and alumina projects to come on stream. Feasibility studies have been completed and investments have been made for Greenfield bauxite projects and Brownfield expansion. Geopolitical and socio-environmental issues and economic viability will continue to pose risk to the new mining projects. 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 after Australia and Guinea.

In June 2016, Emirates Global Aluminium (“EGA”) announced the construction of a major bauxite mine in the Republic of Guinea which will develop an initial 12 million tonnes per annum (Mtpa) bauxite mine in the Republic of Guinea. In December, EGA announced the first bauxite bulk sample shipment of 55,000 tonnes from its Guinea mine to China. The shipment initiates EGA’s programme to unlock Chinese and other markets for Guinean bauxite in the coming year.
 
Mining giant Rio Tinto remains committed to the $2.6 billion Amrun bauxite mine expansion near Weipa and the development would continue in 2017. The 40 kilometre main access road was completed in December 2016, with the river terminals expected to be operational in the first quarter of 2017.
Companies like Metro Mining Limited and Metallica Minerals are drawing huge investments in bauxite projects in Australia.

Top players

Rio Tinto

Rio recorded a Bauxite production of 47.7 million tonnes during FY 2016 exceeding full year guidance of 47 million tonne. The strong production performance and healthy demand from China would continue to benefit the Group to achieve YOY increase in third party shipment in 2017.
 
Alcoa World Alumina and Chemicals (AWAC)

Alcoa World Alumina and Chemicals (AWAC) has already 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.
 
UC RUSAL

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.

Nalco

Despite a world-wide sluggish market in metal sector, Indian PSU National Aluminium Company (Nalco) has reported 18 per cent growth in its bauxite production in 2016. Nalco is expected to surpass its production capacity of 6.82 million tonne (MT) of bauxite to achieve 7.32 MT productions.

Hydro

Hydro announced through a press release in December 2016 that the company has completed the acquisition of 100% shares in Mineração Paragominas S.A. (MPSA) from Vales. Hydro expects the acquisition will have a positive impact for Bauxite & Alumina segment of about USD 45 million on its result in the fourth quarter of 2016 and they are positive about the coming fiscal year.

The Aluminium Corporation of China

The company will invest more in 2017 to expand its bauxite operations to feed is alumina refineries. Chalco’s expansive bauxite-alumina integrated complex in Guizhou Province is intended for huge bauxite generation in near future.

Emirates Global Aluminium (“EGA”) and Compagnie des Bauxites de Guinea (CBG)

Emirates Global Aluminium (“EGA”) and Compagnie des Bauxites de Guinea (CBG) will play a big role in moving the bauxite industry in Guinea with their expansions and new projects.

The hunger for bauxite is not expected to slow down in 2017. Bauxite and alumina market is in deficit while aluminium is in surplus. This will drive quick growth in bauxite production in 2017. We hope to come up with a clear outlook once the fourth quarter and the full year results of the major companies are released.