Ian Levy, CEO at Australian Bauxite Limited is expecting that the loss of China’s largest bauxite supplier will mean big gains for Australian producers of bauxite.
China, the biggest base-metal consumer, saw a plunge in bauxite imports after a January export ban by Indonesia in order to limit ore sales to spark investment in higher-value domestic smelting. Indonesia supplied 68 percent of China’s purchases in 2013. So global bauxite producers are at queue to fill the gap as demand increases, said Levy.
Australia is already the world’s largest producer of bauxite from mines owned by Rio Tinto and BHP Billiton Ltd. Commodity exports from Australia tripled in the past decade as China’s economy became the world’s second-biggest importer of base metals. While China hoarded about a year’s supply of bauxite before the ban, according to government data, Australia is already boosting output and exports to records.
According to an estimate made by the government, Chinese demand will show a 34% rise in exports of Australian bauxite to 16.8 mn metric tonnes in the end of the year, June 30. Chinese customs did not report any bauxite imports from Indonesia for April and shipments plunged 78 percent from February to 477,386 tons in March.
Sydney-based companyAustralian Bauxite is planning to start production by December in Tasmania, the island located about 260 miles (420 kilometers) south of Melbourne. The Bald Hill mine will produce initially 500,000 tons annually.
“Australia’s opportunity is now,” Levy told a Sydney conference on May 15.
However, the benefit to Australia may be delayed until 2015. China imported a record 8.02 million tons of bauxite in January, just before Indonesia’s ban came to effect on Jan 12th. The country has enough bauxite stock to feed its alumina refineries for a year, according to estimates by researcher CRU and Oslo-based Norsk Hydro.
Aluminum Corp. of China Ltd., known as Chalco announced 1 million tons of capacity cut this year. The country has about half of the global aluminum output. China imported a total of1.6 mn tonnes of bauxite in the month of April, which was low by 77% since last year and lowest since the period July 2012, according to data.
Even the increased output of Australia won’t make up for the supplies lost to export ban, Svein Richard Brandtzaeg, Norsk Hydro Chief Executive Officer said on April 30. The refiners in China relied on 40 mn tonnes of bauxite last year and 71.6 mn tonnes of imports. It also includes 48.7 mn tonnes from Indonesia, data showed.
While the bauxite production in China is rising, it seems to be of low quality and more costly to produce compared with the imported supplies, Citigroup’s Szpakowski said.
China’s supply concerns may push the prices higher, Australian Bauxite said. The average price of bauxite imports in China was $60.49 per ton in the month of April, rise from $59.49 in the month of March and highest since 2008 October, Bloomberg calculations showed.
