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Jun 19

Supply shortage pushes Chinese bauxite prices higher again

Chinese bauxite spot prices increased again in May as the ongoing anti-pollution related production shutdowns caused severe shortages in the market.

Refractory-grade bauxite spot prices jumped 18 May, as the ongoing massive production shut downs in China led trades to be concluded at higher values higher for the second time in May.

The anti-pollution controls in China have increased since the beginning of May, with Beijing shutting down most bauxite mines in Shanxi and Guizhou province, while calcining and processing plants in Shanxi and Tianjin were also impacted.

Only a minority of facilities that meet the strict environmental standards are allowed to continue production, but raw bauxite supply remains scarce due to current mining restrictions, market participants told IM.

“The whole system is choked, the supply is cut,” one US-based trader told IM.

“We have a bottleneck in Shanxi, we have no raw material, all the kilns are not running….Guizhou also more or less same situation,” another Europe-based trader agreed.

Following a price increase in early May, China-origin bauxite’s values rose again over the past two weeks amid reduced supply, according to IM’s assessment of the market on 18 May.

Prior to 2017, bauxite prices were depressed for the past few years amid oversupply and weak demand.

Spot prices of 85% refractory-grade bauxite (85% Al2O3/2.0/3.15-3.2/0-6mm) rose to $330-340/tonne on a FOB Xingang basis, while 86% bauxite increased to $340-350/tonne, both grades gained $10/tonne compared to previous assessment on 4 May.

As supply for higher-grade material, above 86% Al2O3 content, was even scarcer, 87% and 88% bauxite were trading at a higher premium in the market.

87% bauxite jumped to $390-420/tonne, up an average of $47.50 compared to a fortnight ago, while 88% was assessed at $420-440/tonne, both on FOB Xingang basis 18 May.

Only one supplier was reported to hold stock for the 87% bauxite in the market and bigger volume trades to refractory makers were concluded at $390/tonne while smaller lot sizes were sold at the higher range, according to the supplier and one Tianjin-based trader.

The output disruption in China has also caused shipment delays. At least two refractory makers in Asia and Europe reported delivery delays of up to one month.

Amid the severe supply shortage in China, producers elsewhere are reportedly receiving more enquiries.

But production elsewhere would not be able to replace lost output from China, market participants told IM.

While there is no official export data, one Europe-based distributor claimed China exported up to one million tonnes of bauxite in 2016, with shipments to Europe, Turkey and North Africa accounting for half the volume. While another Europe-based trader estimated Europe imports about 350,000 tonnes of bauxite from China.

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