Australian Bauxite Ltd: bauxite sales strategy avoids market glut problems

Australian Bauxite Ltd (ABx) currently sells bauxite into cement and fertiliser markets at prices higher than could be achieved in the over-supplied metallurgical bauxite market.

There have been developments in the metallurgical bauxite market in the last few days which indicate that the metallurgical bauxite market could worsen further due to a glut of new supply during 2017.

ABx diversification avoids the metallurgical market glut.

The clean chemistry of ABx's bauxite allowed ABx to sell cement-grade bauxite which:

1.Consistently increases the late strength of concrete;

2.Is quartz-free & salt-free for corrosion-resistance;
 
3.Eliminates stoppages & pressure problems in kilns, lowers kiln temperatures & reduces emissions.

Many cement manufacturing plants are converting from coal-fired to gas-fired production which increases demand for cement-grade bauxite to add aluminium oxide and lesser amounts of iron oxide that would normally have been provided by the coal.

Infrastructure construction in USA is increasing demand.

North American cement-grade customers are advising that the rate of construction of North America's infrastructure is set to grow rapidly in 2017 which is making cement-makers seek ways to maximise output by eliminating stoppages and by increasing late strength of the cement. ABx's cement-grade bauxite does both.
 
ABx's recent 5-fold increase in the resource tonnages at its Fingal Rail Project shows that ABx can enter into long-term contracts with major cement-grade customers, subject to satisfactory contract terms which are currently being negotiated.
 
TasTech: ABx has increased testwork on the TasTech technology that separates ABx's bauxite into its 3 product-components: metallurgical-grade, cement-grade and fertiliser-grade bauxite. During this research, ABx encountered two additional technologies that can produce pure bauxite and high-value products. Testwork will continue throughout 2017 with the objective to commence production in the 2017/18 summer period.
 
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Chinese metallurgical bauxite market to November rose off the lows of mid-2016 but new suppliers in 2017 could mean metallurgical market will be grossly oversupplied.
 
- Imported tonnes down 40% since Dec'15 and prices remain stable at US$48.74/t.
- Malaysian tonnages down to only 0.26Mt of low-value bauxite averaging US$37.70/t.
- Guinean Bauxite keeps flooding into China: 1.18Mt at a low price of US$56.93/t CIF price.
- Indian Bauxite supply is rebuilding to 0.20Mt as Chinese refineries buy Guinean bauxite instead.

Recent new developments increase potential for a glut of metallurgical bauxite in 2017.

- Alcoa has been given permission to export 2.5 million tonnes of metallurgical bauxite per annum from its WA operations for the next 5 years.

- Indonesia is showing signs of relaxing its ban on exports of bauxite.
 
Australian bauxite is dominating at 2.05Mt or 48% of the total, mainly from Rio's Weipa and Gove mines. Australian bauxite prices are falling as Rio buys market share?

Indian bauxite sales into China have begun rising slowly as Indian-type gibbsite-trihydrate bauxite has been replaced by Guinea bauxite whilst it is cheap and shipping costs are low. Prices are low at US$37.53/t.
 
Bauxite from Guinea in West Africa floods into China at 1.184Mt in October at US$56.93/t CIF China.

Malaysian bauxite supply fell 62% to only 261,000 tonnes in October as Malaysian producers struggle to achieve grades above 45% Al2O3 by washing its bauxite. The 15% collapse in Malaysian prices to US$37.70/t CIF China is unsustainably low, except for cowboy operators.