Further crackdown on environmental rule-breaking plants in Shanxi have slashed calcined bauxite output, pushing prices up over the past fortnight.

Chinese calcined bauxite spot prices increased over the past fortnight as the already tight supply dwindled further amid more governmental shutdown of production facilities.

The Shanxi government announced 11 August that all plants that breached environmental standards in the refractory minerals producing province will be closed by the end of September. This rule followed Tianjin’s plan to relocate mineral processing plants in the port city that was announced at the end of June.

The two measures have brought further disruption to calcined bauxite production facilities. Combined with limited
availability of high-grade ore, output has been slashed.

Although one Shanxi-based producer observed that there are still some plants operating secretly against the authority’s rule, overall production volume has declined sharply.

Buyers in the market have encountered great difficulty in sourcing material over the past fortnight and many suppliers were reluctant to provide quotes amid the uncertainty.

«There is no stock in the country, so it’s not possible to export,» one Tianjin-based trader told IM.

«I’m not making any offer – it is pointless,» he added.

A Europe-based trader agreed: «[It’s] the same situation, [but] it’s getting worse. The price is going up, there is no material.»

All spot prices of refractory-grade bauxite on a FOB Xingang basis increased, according to IM’s price assessment on 24 August.

Spot prices for 85% refractory-grade bauxite (85% Al2O3/2.0/3.15-3.2/0-6mm) increased to $370-390/tonne FOB
Xingang, up by an average of $15/tonne from two weeks ago.

86% bauxite also rose to $390-400/tonne, up $10/tonne compared to a fortnight ago.

87% bauxite jumped to $400-450/tonne, compared to $390-400/tonne previously, while 88% was assessed at
$450-480/tonne, up from $400-430/tonne previously.

Environmental restrictions to get worse

At least two Chinese producers and one distributor believed that environmental inspections in Shanxi, Tianjin and Henan – provinces around Beijing – are likely to intensify in September and October ahead of a major sporting event (the National games) being held in Henan and the 19th national congress of the Communist Party in the capital.

One Europe-based distributor claimed that the authorities could close down most of the industries around Beijing, he told IM.

The government’s crackdown on tax evasion further disrupted the market, said the Shanxi-based producer.
«[There is] more uncertainty. It’s very difficult to know if deliveries are going to happen,» said one Europe-based distributor.

The global steel industry has reached «an important inflection point» that requires steelmakers to consider new strategies to survive, World Steel Association Director General Edwin Basson said May 11.

Speaking during the Eurometal World Steel Distribution & SSC Summit in Dusseldorf, Germany, Basson said current global installed steel capacity, which is about 2.39 billion tonnes, is already enough to meet supply requirements through 2035.

Finished steel demand is likely to be about 1.535 billion tonnes in 2017, up only 1.3% from the previous year, and nearly 1.549 billion tonnes in 2018, an increase of 0.9% year on year. Strong steel demand growth in developing countries will offset stabilizing demand in developed economies, but it means mostly flat overall global demand is likely for the next two decades or more, Basson added.

Combine those factors with declining trends in steel use, due in part to increased production of high-strength lightweight steels and a sharper focus on reuse and recycling, and the outcome is clear.

«We believe that steel demand, in terms of volume, has reached an important inflection point,» he said. «It will continue to grow, but the growth … is going to be much slower than it has been in the past two decades.»

Basson said a ton of steel remains in use for an average of 47 years in Europe, 44 in the U.S. and less than 40 in China. The global average is about 45 years. With technological improvements resulting in less steel being required in many applications and yielding longer lifespans for the material, those averages are likely to increase, he said.

«If it’s only five years that we’re extending the life of steel, it means that we’re pushing that demand forward five years,» Basson said. «As steelmakers and users of steel, we should begin to plan around this [knock-on effect].»
In addition, as emerging economies have developed their own domestic steel industries, and global overcapacity has pushed tons into the export market, trade case filings in the U.S. and Europe, in particular, have increased in volume in recent years. Basson cautioned that such a strategy is unlikely to be sustainable.

«Protectionism can help us in the short term … but it cannot in the long term provide stability in an industry that is driven by global forces,» he said.

MagForum 2017 analyses latest issues and spotlights potential newcomers and markets

Key takeaways

– China: supply impact issues to beset 2017-18; controversial trade reforms proposed

– New supply sources and capacities: Saudi Arabia (DBM+CCM), Australia, Canada

– Refractories: steady growth in steel demand; good cement outlook for certain regions

– Market opportunities in hydrometallurgy, flame retardants, environment, cement board,welding, and pulp and paper.

BRUSSELS — The European Union has set duties of up to 35.9 percent on imports of hot-rolled flat steel from China to counter what it says are unfair subsidies in a finding challenged by Beijing.

The European Commission (EC), which conducted an investigation on behalf of the 28 EU members, found a number of Chinese companies had benefited from preferential lending from state-owned banks, grants, tax deductions and the right to use industrial land.

«We are continuing to act, when necessary, against unfair trading conditions in the steel sector, and against foreign dumping,» EU Trade Commissioner Cecilia Malmstrom said in a statement. She added that she hoped global discussions on steel overcapacity would eventually convince China to end unfair schemes to ensure a level playing field for all steel producers.

China’s Commerce Ministry said it «strongly» questioned the legitimacy of the EU decision, adding the European Commission had ignored the fact China’s steel exports to Europe had declined in 2016. It said it would take all necessary measures to protect the interests of Chinese firms.

The EU had already set in place anti-dumping duties, to counter excessively low prices, which it has now adjusted to a range of between zero and 31.3 percent. «Today’s announcement marks a notable shift in the EC’s policy stance by taking into account the ‘threat of injury’,» investment bank Jefferies said in a note.

Jefferies said the case could have positive implications for imports of other types of steel, adding that it expected European steel industry group Eurofer to ask the Commission to launch more anti-subsidy investigations.

The bank noted that while Chinese hot rolled coil imports have fallen 89 percent in the year to March, and cold rolled coil imports, also protected by duties, have declined 46 percent, other product categories like coated sheet have soared. Hot-rolled flat steel is used in shipbuilding, gas containers, pressure vessels, tube and energy pipelines.

The targeted companies include Benxi Group [LNGOVB.UL], with overall anti-dumping and anti-subsidy duties of 28.1 percent, Hesteel Group, with a rate of 18.1 percent, and Jiangsu Shagang at 35.9 percent. The duties, applicable for five years, will take effect from Saturday, the EU’s official journal said.

The EU has taken over 40 anti-dumping decisions to aid European steel producers, with measures on cold-rolled flat steel and stainless steel from China. It also has an ongoing investigation into hot-rolled steel imports from Brazil, Iran, Russia, Serbia and Ukraine.

Chinese bauxite prices have jumped again in June, continuing the uptrend since May as the Chinese government ramps up efforts to stamp out polluting operations.

Chinese bauxite spot prices rocket higher in mid-June as the government targets remaining illegal calcining operations to further stamp out polluting facilities, which will slash yet more supply.

Mining operations in major bauxite-producing regions Shanxi and Guizhou were mostly suspended in May as the central government ramped up anti-pollution control. Under the newly enforced measures, calcining and processing plants in Shanxi and Tianjin were also affected.

Although the majority of plants that did not meet environmental standards were shut, some continued to operate illegally at night, two Europe-based traders told IM.

However, the Chinese environmental teams in Tianjin and Shanxi are continuing to undertake inspections in order to control pollution levels. Shanxi government announced on 15 June that it will carry out a special large-scale investigation on all operations in the province. The government has also encouraged locals to report any illegal operations.

«Some small unlicenced producers in Xingang, Tianjin, continue to produce during the night. The Government Environmental Team in Hebei and Tinjin have been tipped off by other suppliers that this continues to happen and the government is now focused on these suppliers and their customers,» one Europe-based distributor told IM.
As a result, many more plants are expected to shut down in the coming weeks, market sources said.

Amid heightening anti-pollution control, and the resulting suspension of production, bauxite stock levels are said to be depleting quickly, which has supported prices over the past two weeks.

Spot prices of 85% refractory-grade bauxite (85% Al2O3/2.0/3.15-3.2/0-6mm) rose to $380-390/tonne on an FOB Xingang basis, while 86% bauxite increased to $390-400/tonne, both grades gained $40 compared to a fortnight ago, according to IM’s assessment on 15 June.

Smaller volumes of 85% bauxite were reported to have traded at above $400/tonne in Europe and Asia, but these could not be verified at the time of publication.

87% bauxite held unchanged at $400-430/tonne, 15 June, while 88% was assessed at $430-470/tonne, up from $430-450/tonne previously, both on an FOB Xingang basis.