China's growing bauxite appetite to buoy up domestic prices from their current lows

In our last update on China bauxite market, dated May 17, we reported a downtrend for the ore prices in few of the major Chinese provinces. The data presented clearly showed that the average bauxite price (6.0=Al/Si<7.0) in Henan was down at RMB 380 per tonne (-10% from the previous week) and Bauxite (6.0=Al/Si<7.0) Shanxi stood at RMB 355 per tonne (-5% from the previous week), as on May 16. However, given the rising bauxite demand in the China domestic market and the recent clampdown on tax evaders, these price trends are expected to reverse in the short term.

According to research by Torvald Klaveness, China’s continued appetite for bauxite is also helping to drive up the tonne-mile demand for the dry bulker sector. The world's largest aluminium consumer is going farther afield for the ore. 

“Ton-mile of Chinese bauxite and alumina imported in March was up 26 % year-on-year,” said head of Klaveness Research Peter Lindstrom. With imports rising, bauxite price reversal in China domestic market is likely to face moderate headwinds.

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China recently stepped up its bauxite export regulations. Earlier, bauxite exporters would resort to various ways to evade taxes. Now, they are being forced to pay value-added tax (VAT) for the bauxite consignments they are sending offshore. As a result, bauxite miners and sellers are now raising their bauxite prices to include the tax so as to avoid prosecution by the authorities.

As on May 12, average Shanxi Xiaoyi(AL>60,AL/SI5.5) bauxite price stood at US$46 per tonne, Shanxi Xiaoyi(AL>60,AL/SI6.0) bauxite was at US$51 per tonne, Henan Sanmenxia (AL/SI5.5, averagely) bauxite price was US$48 per tonne, Shanxi Xiaoyi(AL60,SI8) bauxite price was US$41 per tonne and Guangxi Baise(AL65 Fe4-5 SI6-7) bauxite price was US$39 per tonne.

CIF Australian bauxite price, as of May 12, was recorded at US$47 per tonne, CIF Indian Bauxite price was US$39 per tonne, and Malaysian bauxite was bought at US$44 per tonne.