CBIX down 1% to $45.4/dmt over the week

CBIX eased over the week, down 1 per cent (US$0.4) to US$45.4/dmt. This comes on the back of a low ViU-priced cargo from Guinea and lower Malaysian FOB prices, which have pulled back slightly, to US$25.5/dmt for unwashed material FOB and US$34/dmt CIF. Unwashed grades are reportedly 40.5 per cent total alumina and 5 per cent total silica, which is consistent with typical Kuantan export grades. Washed prices is quoted at US$43/dmt CIF.

CBIX is "value in use" CFR reference price for a standard gibbsitic bauxite (5 per cent reacting silica, 10 per cent moisture, 50 per cent reacting alumina - 5/10/50) which reflects the market conditions for bauxite imports into China.

The Malaysian pull back has been attributed to demand contraction, which has forced trucking and barging costs lower. We also note that several smaller Malaysian producers have now re-entered the export market, further increasing competition into an already contracting market. Ongoing discussions in Malaysia between miners, government and other stakeholders could result in the current mining ban being extended (again), given a lack of appetite to invest in the current environment. The future for Malaysian bauxite exports appears far less certain than it did at the beginning of the year - we have now cut our forecast export tonnage to 10 Mt (down from 12 Mt) for calendar 2016.

Chinese refiners continue to explore bauxite export opportunities in other countries, with Guinea remaining top choice and other countries, such as Australia and the Solomon Islands, continuing to negotiate for offtake agreements.

North China domestic alumina prices were down 1.2 per cent (RMB23/t) over the week to RMB1,952/t (US$297/t including VAT) with the southern price unmoved on RMB1,865/t (US$284/t including VAT).

Freight rates remained flat over the period.