Bauxite price recovering slowly amid tight global supply and rising demand from China

The tightening of global supply of bauxite and a rise in demand from Chinese alumina refineries are helping drive the price of bauxite back up.

In May 2014, it was at a high of $US78.30 ($104) per tonne before heading for a steady decline; and now direct-shipped, high quality baxuite is worth around $US50 a tonne in China. The Chinese alumina refineries are already starting to feel the effects of supply crunch, which started when Indonesia banned its bauxite exports in early 2014.

That ban was part of a push by the then-relatively new government to create more jobs by banning exports of raw metal commodities such as bauxite, while allowing highly-taxed exports of other metals like copper and zinc concentrates. It was hoped that would stimulate a much larger local refining sector, but the ban came in at a time of dropping commodity prices and the new smelters and jobs have, largely, failed to materialise.

Malaysia immediately took advantage of the situation, and began mining and exporting large amounts of bauxite to China to help fill the supply gap. However growing environmental concerns about unregulated bauxite mining in Malaysia have forced the government to put a moratorium on its own bauxite exports while it considers new regulations.

The demand for Australian bauxite has also grown over the last two years. Industry watchers are of the opinion that China was particularly interested in quality Australian ore deposits.

"They've got a lot of spare capacity now," noted an analyst.

"So they want to utilise the spare capacity in alumina refining and aluminium smelters around China. Ultimately that will enable them to export value-added products globally, so there's no doubt there is a definite surge in demand for high quality bauxite ore," he said.

Australia not only boasts some of the world's largest deposits, but a reputation for some of the best quality.