Capesize rates have recently surged past the $30,000 a day mark, largely driven by record-breaking bauxite shipments from West Africa to China. Bauxite, the primary source of aluminium, is a significant minor bulk commodity typically transported on Capesize vessels.
According to the US Geological Survey, Guinea holds the largest bauxite reserves in the world. In the second quarter of this year, Greek broker Intermodal reported an "unprecedented surge" in bauxite exports from Guinea, reaching a new record, with the majority of these exports destined for China.
China, a key player in the global market, has set a record in primary aluminium production. The significant growth in the first five months of 2024, compared to the same period in 2023, has led to a surge in demand for bauxite and aluminium. This surge, in turn, has directly contributed to the spike in Capesize rates, further highlighting China's pivotal role in the global aluminium supply chain.
According to AL Circle's "Global Aluminium Industry Outlook 2024," the transportation sector, particularly the rise of electric vehicles (EVs), will significantly drive aluminium demand. Additionally, the renewable energy sector, focusing on solar and wind turbines, is emerging as a major consumer of aluminium. The packaging industry increasingly opts for aluminium over plastic and glass, while other key industries are shifting from steel and copper to aluminium.
According to a recent report by Arrow Shipbroking Group, one of the largest privately owned shipbroking groups worldwide, bauxite volumes are notably high at this time of year. This increase is attributed to favourable weather conditions, a rise in supply, and strong demand. Despite the onset of the rainy season in West Africa, it has been drier than usual so far.
The American multinational independent investment bank and financial services company, Jefferies stated in a report, "Given the limited new Capesize fleet delivery schedule for this year (+2 per cent), along with continued high growth in the long-haul bauxite trade (+10 per cent run-rate during 1H24), Capesize vessel demand is growing notably above new supply, especially with the main cape cargo of iron ore growing strongly as well (+5 per cent run-rate during 1H24)."
BRS Shipbrokers, a leading publisher of analyses on shipping and shipbuilding markets, reported that Guinea overtook Brazil in tonnes-days for bauxite Capesize shipments in the first quarter of the year.
Analysts at BRS have highlighted that the Guinea to China bauxite trade route has become crucial to Capesize prospects. This surge in imports not only aligns with but also supports China's significant increase in electric vehicle production, providing a reassuring outlook for the industry's future.
Guinea has rapidly emerged as a key supplier of bauxite to the Chinese market. In the coming years, it is also expected to become a major iron ore provider for China, with the highly anticipated opening of the Simandou iron ore mine next year.
Bauxite was a focal point at this year's Geneva Dry, and it is expected to gain even more attention at the next edition of the world's leading commodities shipping conference.
William Fairclough, Managing Director of Wah Kwong Maritime Transport Holdings, spoke at the iron ore session of the Splash event, “West African bauxite has become much more important and is very much interlinked with iron ore in terms of volumes.”
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