With only half the years bauxite quota to be
supplied, now is the right time for the Chinese government to
stop its licensing system, was the opinion of one
industry participant, following the news that China has stalled
its bauxite tender for the second half of this year
effectively depriving the non-metallurgical (non-met.) bauxite
market of 500,000 tonnes of material (see IM July 09,
Bauxite is in a sticky situation at present. It is best
known as the primary ore for alumina (and thus aluminium)
production; however, in its own right bauxite is a valuable
Bauxite finds applications in abrasives, cement, chemicals,
proppants, refractories, slag conditioning, and welding; not to
mention the plethora of non-met. applications for alumina
grades derived from Bayer alumina. Volume-wise, however,
refractory grade is the biggest market for non-met.
Depending on aluminium demand, around 90-95% of world
bauxite production which amounted to 205m. tonnes in
2008 is refined by the Bayer process to produce alumina.
The remaining bauxite is divided between non-met. markets.
The size, demand and health of the non-met. bauxite market
is largely defined by two factors: the minerals
metallurgical market (ie. aluminium demand), and the
worlds limited commercially developed sources of non-met.
grades. As a result, when times are bad for aluminium (as they
currently are), non-met. markets benefit.
That said, however, the scenario above seems to have
bypassed non-met. bauxite completely, and instead it is stuck
in a lose-lose situation particularly with regard to
refractory bauxite. The reason for this is China.
The China factor
Global bauxite supply and demand is being driven by Chinese
domestic consumption. China has implemented some staggering
investments for its alumina capacity, year-on-year, since
around 2000, and state-owned company Chinalco is now the second
largest alumina producer, and the third biggest producer of
Between them Chinese companies mined 32m. tonnes of bauxite
in 2008 (China accounted for 15% of global production), while
the countrys alumina production was some 19.5m. tonnes.
Consider also that China imported around 22.7m. tonnes
of bauxite in 2006 all because of aluminium demand.
Such huge amounts of bauxite production indicate that, as
many suspect, China is attempting to become self-sufficient in
aluminium: it is certainly no secret that the country has
switched to domestic demand priority (see IM April
09, p.26: The Dragon has turned).
One China-based source told IM: The
Chinese alumina business grew dramatically until 2008 on the
back of historically unusual and unsustainable
high alumina and aluminium prices. Only in 2005-2008 did
aluminium prices stay above $2,000/tonne [Figure 4],
and now once again prices are back to normal long-term levels
of $1,300-1,900/tonne [Figure 5].
The issue with these lower prices is that, in many cases,
the cost of producing aluminium in China is more expensive than
the current market value. This is because of a number of
factors but is largely owing to high energy prices (Figure
1), and the type of bauxite that naturally occurs in
China. This means that it would actually be cheaper for China
to import aluminium.
As one trader commented: What China has failed to
realise is that in the international market it is no use trying
to be self-sufficient when your production cost is far above
the international long-term cost especially during a
If China is indeed attempting to become self-sufficient in
aluminium, the recent failure of the Rio Tinto-Chinalco deal
would have been a major step back in its plans: Chinas
reaction to this is awaited in trepidation by some
Chinas own bauxite reserves consist mainly of a high
alumina, low iron bauxite, called diaspore; certain deposits of
which meet non-met. grade specifications.
It requires processing temperatures of 200-240°C (other
metallurgical bauxite grades require 150-230°C), which has
necessitated Chinese producers adapting the Bayer process to
make the diaspore suitable for aluminium production.
This practise has put further pressure on the refractory
bauxite market, which is limited to sourcing most of its
material from China (mainly Guizhou and Shanxi provinces) and
Guyana (operated by Bosai Minerals Group of Chongqing,
As a result, non-met. bauxite prices soared in 2008, to
around $600/tonne (Figure 2). Some reports indicated
that, at the height of the 2008 commodity boom, prices for
refractory grade Chinese bauxite were more expensive than those
for white fused alumina prompting consideration in using
such high purity materials as a bauxite substitute (see
One bauxite processor exclaimed: What is incredible is
that with some of the best raw bauxite in the world
diaspore the Chinese governments policy has been
to use it to make aluminium... On an economic basis one would
wonder why such a valuable resource has been directed into such
an energy intensive business.
Now the boom has bust, where does this leave China?
Recent reports in Metal Bulletin and the
Financial Times claim that aluminium inventories at
the London Metal Exchanges (LME) warehouses are at an
all-time high: analysts expect inventories to breach the 5m.
tonne mark by Q3 2009. There is simply no demand.
But despite this, in June prices for aluminium reached a
five-month high of $1,701/tonne. Artificially high prices have
been created thanks to worries over security of supply. And now
investors who gambled that prices would fall (based on flat
demand from construction and other sectors) have panicked and
bought back these contracts on the first sign of pricing
improvements thereby pushing prices up further.
The problem with these artificial prices is that they have
tempted some Chinese smelters to re-start production, as prices
creep nearer to profitable figures, which has had the
unfortunate effect of pushing even more unnecessary material on
to the market. This also has implications for non-met.
| Figure 1. Crude oil prices ($/bbl), 1991-2009,
Europe Brent spot price FOB
| Source: US Energy Information
| Figure 2. Refractory grade bauxite prices, FOB
China, from 2006 to 2009.
| Figure 3. Calcined alumina prices, medium soda,
bulk FOB, from 2006 to 2009.
| Figure 4. Aluminium prices (LME cash), from
1991 to 2009, High Grade 99.7%
| Source: London Metal Exchange, Metal
| Figure 5. Daily aluminium prices (LME cash),
from 2 January to 15 June, 2009, high grade 99.7%
| Source: London Metal Exchange, Metal
Chinas gargantuan appetite for raw materials over the
past decade has led to a change in its export policies, such as
export quotas and taxes. Significantly for the non-met.
market at least the most recent of these changes has
been the postponement of Chinas non-met. bauxite quota
for the second half of the year, due to what it says is poor
Tim Geldmacher, managing partner of German minerals trader
Cofermin Rohstoffe GmbH, which deals in a number of non-met.
bauxite grades, told IM: Generally
speaking the market for bauxite always depends on the export
policy of the Chinese government.
Export taxes and licenses form a big share of the
price, which means that availability and price of the product
is not fully market driven. Any decision by the Chinese
government may change the scenario on short notice,
What this all means is that, ironically, at the time when
huge stockpiles of cheap, refractory bauxite should be building
up owing to high inventories of aluminium instead
the grade is expensive and in deficit.
Geldmacher said: There is currently almost no mining
of raw bauxite in the Xiaoyi area of Shanxi. According to our
information this is due to a number of accidents that have
occurred in underground mining over the last years... The
government has put a ban on underground mining which we
understand might last until Q4 2009. Whatever excess inventory
might exist [at present] will likely disappear.
One market commentator explained: Because of the
continuing uncertain outlook for bauxite usage at these prices,
and the uncertainty of the export system, no one dares invest
in Chinese bauxite at a mining level. Further, since the export
licenses are allocated proportionately to myriad small
companies, it makes it impossible for any exporter to plan the
year ahead either in price or volume.
Geldmacher continued: China has very distinctly
assumed the position of raw material consumer instead of being
a supplier to the rest of the worlds
It seems clear that the export politics will remain
very restrictive due to the need for Chinas own
consumption, and that bauxite like many other Chinese
raw materials has discontinued being the cheap and
unlimited source for the world markets, he said.
Now that China has stalled the H2 2009 export quota,
shortages of non-met. grades (and in particular, refractory
bauxite) will only become more acute. But there are other
sources of bauxite.
Guyana old & new sources
| World bauxite production, 2008
||Production (000s tpa)
|Bosnia and Herzegovina
Source: US Geological Survey, Bauxite and Alumina, 2009
Mineral Commodity Summary
Guyana has a long history of bauxite production and is home
to significant deposits of cement, chemical, metallurgical and
refractory grades. Alcoa Inc. first exploited met-grade
deposits in Linden in 1917, while the well-known Refractory
A-grade Super Calcined (RASC) grade was discovered in Guyana in
Once the leading producer of RASC, Guyanas position
was replaced by low cost grades from China during the 1980s.
But now the country is experiencing something of a revival.
China-based, privately owned, Bosai Minerals Group, acquired
Guyanese bauxite miner Omai Bawtife Minins Inc. in December
2006 which saw the only major source of refractory
bauxite outside China come under Chinese ownership.
Bosai produces met-grade alumina, aluminium, RASC grade
calcined bauxite and other minerals, under subsidiary Bosai
Minerals Group (Guyana). The group has a 600,000 tpa calcined
bauxite capacity; however, in April the group cut production by
30%, owing to slowing demand (see IM May 09,
Despite slowing consumption, refractory bauxite is still a
valued commodity which thanks to a lack of mining and
exports from China is becoming increasingly scarce. It
is rather timely, then, that a new source of RASC grade bauxite
may soon be on the scene, in the form of company First Bauxite
Corp. (formerly Academy Ventures Inc.), headquartered in
First Bauxite owns three bauxite assets in Guyana
Bonasika, Essequibo, and Waratilla-Cartwright which
comprise deposits of cement, chemical, metallurgical, and
refractory bauxite. The company is in pre-production and
recently entered into a financing agreement with Pacific Road
Resources Funds to secure funding of around $27.3m.
Hilbert Shields, chief executive officer and director of
First Bauxite, told IM: We are currently
sonic drilling, conducting ore beneficiation and calcining
testing, doing market studies and establishing contact with
potential customers. We also have a number of engineering
consultants on board, and we are sourcing and costing mining,
washplant and calcining equipment.
Shields confirmed that First Bauxite will primarily be
targeting refractory grade production: There are not many
significant deposits waiting to be developed that have our high
alumina, low iron, and low alkalis bauxite. First Bauxite will
be a new Canadian producer but it will be [supplying] from a
well known and recognised, high quality bauxite.
Possible RASC plant capacity is yet to be determined,
although Shields indicated that production figures will be
better known when pre-feasibility studies are complete.
Although First Bauxite will initially be targeting
refractories, Shields also confirmed that the company will be
looking into supplying the abrasives and proppants market.
Regarding the current bauxite market, Shields was frank:
The demand for metallurgical bauxite has taken a beating
and a number of mines have cut back production and rationalised
Given that most of the bauxite in the world is
produced for alumina and captive, the future for bauxite is
directly linked to that of aluminium. In my opinion there will
be a significant time lag in bauxite recovery behind that of
aluminium and then alumina.
Considering the many challenges that the bauxite market
currently faces, there is some industry speculation from the
non-met. sector as to how economically viable the mineral
| World alumina production, 2007
||Production (000s tpa)
|Bosnia and Herzegovina
| Source: US Geological Survey, Bauxite and
Alumina, 2007 minerals yearbook
In refractory applications, bauxite is primarily used in the
production of refractory bricks and monolithics for general
heat containment, and has a maximum service temperature of
about 1,650°C. Its alumina content is below that of BFA,
white fused alumina and tabular alumina, but above that of
other alumino-silicate minerals such as andalusite, chamottes
and flintclay, and mullite.
However, owing to high bauxite costs and tight supply, both
these material groups are being evaluated as potential
substitutes for bauxite in specific applications.
Despite their lower alumina content, andalusitead and
mullite are able to perform to the same service temperature as
bauxite 1,650°C. Additionally, the price/performance
ratio in many refractory applications is currently favourable
for mullite versus Chinese bauxite.
Cofermin, which in many parts of the world is the exclusive
sales agent for South African miner Andalusite Resources Pty
Ltd, told IM: We have seen a strong
increase in demand for andalusite. For many applications in
refractories, andalusite is simply a better raw material than
Geldmacher said: During the last two years the bauxite
prices were and are today substantially higher than the prices
for andalusite. Andalusite Resources recognises the trend of
increasing andalusite demand in the future... and has therefore
completed plans to increase production capacity substantially
if the market so demands.
Andalusite is also experiencing tight supply, but its
availability is more reliable than that of bauxite and there is
no local governmental interference.
Likewise, the availability of chamottes, flintclay and
mullite is currently very good. Bernd Durstberger, head of
Imerys Minerals for Refractories division, revealed at
IMs 15th Bauxite and Alumina
Seminar that the group recently invested in its refractory
minerals division to raise chamottes and mullite capacity to
Regarding these minerals, Durstberger concluded: No
supply issues are foreseeable and [there is] good opportunity
for refractory producers to switch over from bauxite and obtain
long-term supply and quality security.
Thus while refractory grade bauxite continues to be
monopolised by China (and China-owned companies), it will
remain short in supply and highly priced. The situation seems
to be paving the way for other alumino-silicate minerals to
encroach on bauxites share of the refractory market.
Non-met. bauxite supply highlights
Brazil: The only remaining producer of
calcined grades is Mineração Curimbaba Ltda.,
which mines around 700,000 tpa of bauxite.
Mineraçãos main grades are abrasive grade
calcined bauxite for brown fused alumina (BFA) and proppants.
Until recently the companys bauxite was either consumed
internally to manufacture its own range of proppants, or
diverted to sister company and fused minerals producer,
Greece: The largest producer of bauxite in
Europe is Greek minerals group S&B Industrial Minerals SA.
S&B produces a wide range of non-met. grades, and also
trades calcined bauxites, high quality chamottes and brown
fused alumina, through subsidiary Otavi Minerals.
Guinea: It used to be a significant
supplier of abrasive grade calcined bauxite, but now Guinea
appears to be mostly geared towards metallurgical bauxite
developments. The country has large bauxite resources and
development projects for integrated bauxite and alumina
Turkey: Relative newcomer Demireller Mining
Ltd, which formed in 2002, mines bauxite and magnesite in the
Taurus Mountains of south-west Turkey. The company produced
500,000 tonnes of bauxite in 2008, including grades suitable
for abrasives, alumina, calcium aluminous cement (CAC),
Portland cement, and slag conditioning.
Also new to the market is Istanbul-based Albuck Mining,
which began bauxite exploration near Mugla, south-west Turkey,
in 2007. Albuck, a joint-venture between the German Buck family
and two Turkish families, produced 200,000 tonnes of non-met.
bauxite in 2008, and is eyeing 350,000 tpa by 2012 (see IM
May 09, p.9). Albuck produces diasporic bauxite for
CAC and Portland cement, and bauxite for slag