China Hongqiao secures term shipments to replace Indonesia bauxite

China Hongqiao Group Ltd , the country's second-largest aluminium producer, has secured sufficient bauxite to replace supplies from Indonesia, which imposed a ban on exporting unprocessed mineral in January.

China in January imported 6.1 million tonnes of bauxite from Indonesia, which halted ore exports from mid-January, in a move to force miners to build processing plants and smelters within the Southeast Asian nation.

The company had signed term contracts with miners in Australia and India to supply more than 10 million tonnes of bauxite per year for three to five years, starting 2014, China Hongqiao Chief Executive Officer Zhang Bo said.

"We have found (bauxite) to replace the shortfall from Indonesia," Zhang told reporters in a news conference in Hong Kong on Monday after the company reported results for the six-month ended June 30 on Friday.

"The term contracts are enough to replace the supply from Indonesia."

China Hongqiao held plentiful bauxite stocks at about 14 million tonnes currently due to the term shipments and increased imports in 2013, Zhang said.

He added that the term contracts would give the company three to five years to find its own bauxite mine.

China Hongqiao was conducting a due diligence on a project after the firm in May signed a memorandum of understanding for a possible investment in a bauxite deposit in Guinea, Zhang said.

The company is also building a $1 billion alumina project with 2 million tonnes of capacity in Indonesia.

The first phase of the Indonesia project, with 1 million tonnes of capacity, would start production around the end of 2015, Zhang said.

Zhang expects the alumina refinery in Indonesia to start production at the end of 2015 as the building time of a power plant that is designed to provide electricity to the refinery would take longer than the refinery. The company had earlier expected production from the refinery in October 2015.

Meanwhile, China Hongqiao expects domestic aluminium prices to rise in the second half of the year, from the first half due to steady demand.

Zhang said demand of aluminium in China, the world's top consumer and producer of the metal, had risen more than 13 percent in the first six months of 2014 from the same period last year and the consumption was likely to be better in the second half than the first half.

Spot aluminium prices in China AL-A00-CCNMM have risen more than 5 percent since the end of June, to 13,990 yuan per tonne on Monday, although production of primary aluminium hit a second consecutive record in July.