Bauxite supply tightness in Shanxi expected to lift prices in the short term

According to Shanghai Metals Market, bauxite supplies are tightening in Shanxi province, the main bauxite producing area in north China. Supply of bauxite with an alumina/silicon ratio above 4.5 was short in the market, as the Shanxi government started checks on illegal mining across the province.

The drive that started on March 1 to protect ore resources, has suspended much operations across most bauxite mines. Some of the closed mines are Jiaokou’s Xishan mine, Taohua mine, Xiaoyi’s Yangquanqu mine and Xiaokuang . Xiangwang mine is producing bauxite grades that have lower alumina content than required.

SMM expects bauxite prices in Shanxi to rise RMB 40-60 per tonne in the short term and RMB 20 per tonne in May. SMM also learned that an alumina plant raised its bauxite purchasing prices by RMB 20 per tonne this week. The one month graph for Shanxi Bauxite (4.5≤Al/Si＜5.5) below shows the rising prices.

Alumina plants do not want to purchase low-grade bauxite that accounted for most of the inventories across mines. Mines take time to ship Bauxite grade (4.5≤Al/Si＜5.5) to sellers who booked orders with advance payments. Sellers are holding back cargoes at crushing plants expecting higher prices in future.

Most crushing plants are suspended due to environmental inspections, with a few maintaining normal operation while some operating at night. Crushing plants process bauxite ores used by alumina plants. A shortage of local crushing capacities will result in higher transportation fees for processing in other locations.

The environmental norms require the crushing plants to operate in fully-covered, steel-structured locations to avoid ores mixing with air and it requires extra cost to construct such plants. This could either raise processing costs or suspend crushing plants from operation.

Alumina plants are expected to have low bauxite inventories at 20-30 days level due to tightness in bauxite supply in Shanxi. Alumina production in Shanxi is expected to expand this year with about 1 million tonnes each to be added at Xinfa Chemical and Jinzhong Chemicals, and 300,000 tonnes to be added at Senze Coal Aluminum. This is likely to further tighten the bauxite supplies in Shanxi.