How quickly the tide turns. In less
than two years the non-metallurgical grade alumina (NMGA)
market has been transformed from an investment nightmare into a
financial playground of acquisitions, exploration and capacity
expansions (see Table 1: Supply
Not all alumina producers have
emerged from the recession unscathed: Germanys leading
speciality alumina producer, Almatis GmbH, only last month
settled on a debt restructure proposal with parent company
Dubai International Capital that will reduce its estimated
$1bn. debt. Almatis is expected to file for Chapter 11
bankruptcy to facilitate the restructure.
Despite the alarming headlines,
Almatis debt restructure will secure the groups
financial position and the bankruptcy filing will protect it
from creditor actions during this process. It is understood
that DIC has raised around $700m. which will be used to repay
senior debt in full with interest and provide for junior
creditors (see news p.17). Meanwhile, business will
continue as usual.
Newly-formed fused alumina ingots stacked for
cooling. The process takes over a week to complete.
Also in the headlines was Rio Tinto Alcans sale of its
activated aluminas plant in Brockville, Ontario to French
chemicals group Axens, in August 2010. The sale (price not
disclosed) comes after RTAs completion of a
strategic review of its North American
Despite these developments, on the
whole NMGA producers are beginning to loosen their belts and
return to full capacity, while a raft of price
increases some as much as 15% are due in Q4 this year
(see panel: Alumina prices outlook). There are
definite signs of long-term growth returning to the market.
After the first signals of
price increases during Q1 2010, the trend is confirmed for the
end of 2010 and 2011. This is due to direct cost increases over
the last period for raw materials and energy, but also the need
for future investments to ensure market demand growth,
Fred Huguet, Rio Tinto Alcans marketing and communication
director Ð Specialty Alumina Europe, explained to
Of course, the catch with the NMGA
market is always thus: how is the aluminium market
Figure 1: Global production of primary aluminium, 2008
Source: US Geological Survey
The size, demand and overall health of the non-metallurgical
alumina market is largely defined by two factors: demand from
its end use sectors (such as refractories and flame
retardants), and activity in the aluminium market as this
determines consumption of metallurgical grade alumina.
When demand is poor for aluminium,
NMGA markets benefit from higher availability of material and
lower prices. Yet when times are good for aluminium,
non-metallurgical grades suffer. Ultimately, NMGA availability
is not fully market-controlled and price trends broadly follow
those for aluminium (see Figures 5 and 6).
Presently aluminium prices are
teetering on the lower end of the scale, with much of June and
July witnessing prices below $2,000/tonne. August saw prices
climb again, although for how long is uncertain analysts
say there is simply too much material on the market.
Responding to these fluctuations
Alcoa, a leading US aluminium producer, has announced that it
will offer customers index pricing rather than contracts based
on a price linked to the London Metals Exchange as its alumina
sales contracts are renewed.
Looking at the global market scale,
primary aluminium production is dominated by Chinese companies
and China is by far the largest producer. In 2008 the country
accounted for 13.2m. tonnes of production, with Russia in
second producing 3.8m. tonnes (Figure 1).
Until 2008 Chinas aluminium
business saw unprecedented growth, occurring on the back of
historically unusual (and unsustainable) high alumina and
Record prices in mid-2008,
approaching $3,400/tonne, spurred Chinese smelters that were
already churning out vast quantities of material to produce
more aluminium; flooding the market at a time when the
recession meant that aluminium consumption was falling and
efforts to idle capacity were being undertaken by producers
elsewhere in the world. As stocks grew, prices fell.
This is the type of industrial
overcapacity that the Chinese government is attempting to rein
in, however, and recent moves by leaders in Beijing could see
Chinas aluminium business lose some of its power.
One of the governments latest
initiatives has been to cut the export tax rebate on more than
400 products including many ferrous and non-ferrous
metals with energy-intensive and polluting industries
targeted (IM 14 July 2010:
China cuts export tax rebates). Crucially, as a range
of these products have been subject to antidumping
investigations, scrapping the rebate could soothe foreign trade
relations as Chinese exports become unprofitable.
A second initiative announced last
month saw the government single out 2,000
companies including 17 aluminium producers (371,000 tpa
capacity) for closure. Publicly named and shamed, the
companies targeted are believed to include the most inefficient
and polluting operations in the country.
The companies on the
governments blacklist have been ordered to cease
production at selected operations by the end of September 2010.
Firms which continue to operate will face restrictions on
getting loans, approval for new projects, and land access
refusals. Clearly China is becoming serious about companies
obeying government orders.
Figure 2: Alumina hydrate markets, 2008 (3.6m.
Source: Ted Dickson, 2010
Figure 3: Calcined alumina markets, 2008 (2.4m.
Source: Ted Dickson, 2010
China alumina: Bust in five years
Faced with tightening government controls, perhaps what Chinese
companies need least is raw material
shortages unfortunately, demand for NMGA is outstripping
the availability of higher grades of bauxite used for its
production, one Chinese-based alumina producer told
Combined with tight supply is the
rising cost of electricity and unfavourable currency rates from
appreciation of the renminbi; all of which have created a
perfect storm that has slashed the competitiveness of Chinese
alumina on the global market.
Alumina from outside China is
cheaper than domestic production because of bauxite quality and
energy costs, with renminbi appreciation making it worse,
the producer told IM. Many domestic
alumina producers will go bust in the next five years many
The price of
non-metallurgical alumina is continuously rising, little by
little, because of the limited resources and increasing
electricity prices. Energy costs will continue to go up as the
electricity usage of domestic consumers grows and competes with
industry, the source explained.
Falling US dollar prices for
aluminium have also compounded the supply challenges in the
Since there is limited
production of alumina raw materials and large consumption in
the domestic market, Chinas policy is to try to keep the
materials for domestic market and future use, another
Chinese alumina processor explained.
On the other hand, since
there are so many mining disasters and environmental issues,
the Chinese government has increased tax, quotas and the cost
of mining, to control the exportation of alumina. The prices
for alumina have been stable during the financial crisis, but
in the end the US dollar price of aluminium is what
matters, the company commented.
Figure 4: Regional chemical alumina production
Source: Ted Dickson, 2010
Chinas falling competitiveness in the global NMGA market
is a welcome development for producers and consumers elsewhere
in the world. In a recent IM online poll, 49%
of participants believed that Chinas restriction of raw
material exports was a great opportunity for their
business. Meanwhile, less than a quarter thought the export
restrictions were disastrous and only 16% thought
the countrys export policies were cause for concern.
For alumina producers in the rest
of the world, the Chinese government could not have timed its
new export initiatives better. NMGAs principal markets
are on the rebound and many are heading for definite
The NMGA market is estimated at
about 5.5-5.8m. tpa, with about 2.8m. tpa of this defined as
speciality or premium alumina grades.
Of this premium section, the main product is calcined alumina,
which is largely consumed in the refractories and ceramics
industries. Alumina aggregates such as tabular alumina and
white fused alumina are the second largest product group of the
speciality grades, with end markets in refractories and
abrasives, while the third major speciality product line is
hydrates for flame retardants and fillers.
Alumina is strongly tied to
refractories consumption and thus it follows the demand trends
seen in aluminium, glass and steel markets.
Barbara Steuler, marketing director
for Almatis, told IM: During the next
two years we expect the speciality alumina industry to continue
to grow on average about 4-8% depending on the regions; of
course China, together with some of the other developing
countries, will continue to grow at the higher end of the
range. Steel growth for 2011 is currently projected at a global
average of 5% driving the consumption of calcined alumina,
tabular alumina and white fused alumina for the refractory
Almatis also expects further growth
for the NMGA market owing to demand for higher performance
synthetic alumina products in refractory applications. This has
arisen because of two primary factors: changing technology, and
high prices for alternative alumina aggregates such as brown
Steuler said: Reformulations
will happen to the benefit of the higher performing synthetic
Figure 5: Aluminium prices (LME cash), August 2007 to
August 2010, high grade 99.7%
Source: London Metals Exchange, Metal Bulletin
Refractories: changing uses
Certainly refractory mixes have seen significant change over
the past few years. When signs of recession started to bite
into refractory-consuming markets, refractory producers began
to decrease bauxite usage to minimise the impact of the
minerals high price tag.
As ANH Refractories Bill
Orlandi discussed at IMs Bauxite and
Alumina seminar in 2009, product mixes were developed to
contain more alumina materials, as much as 60-70%, and brands
with high bauxite content lost popularity. Recycling programmes
were expanded in an effort to reuse as much high-alumina
material as possible.
But it is important to note that
refractory product development has been evolving to
high-alumina mixes since pre-recession times, evident of a
longer overall trend in this market. The consumption of
high-alumina and synthetic alumina materials in refractories
has increased as high process demand and improved technology in
steelmaking has called for higher grade alumina products.
Refractory linings have been
developed, using tabular and white fused alumina, that are
essentially a combination of cast and shotcrete products. The
benefits of these high-alumina linings are numerous: no tear
out of the old lining is necessary as users can simply
shotcrete over the old lining; and the lining has a longer life
thus users can buy less material.
Almatis has responded to demand in
the high-alumina market with increased presence in anticipated
growth regions, such as China and India. The company told
IM: We aim to continuously add capacity
and capabilities to assure our presence and customer support in
the growing regions.
In terms of product growth, Almatis
has seen the highest demand for tabular alumina and calcined
aluminas, but, Steuler added, many good opportunities
occur also for more unique and advanced products. With
the growing steel industry in China and India, the company
anticipates this trend to continue for years to
Table 1: Selected non-metallurgical alumina supply
|Alcoa World Alumina Chemicals (AWAC)
||calcined alumina, alumina hydrate
||Dak Nong province, Vietnam
||AWAC, a j-v between Alcoa and Alumina Ltd, signed a
cooperation agreement with Vietnam National Coal-Minerals
Industries Group (Vinacomin) in 2008 to conduct a joint
feasibility study of the Gia Nghia bauxite mine and
alumina refinery in Dak Nong, dependent on AWAC obtaining
a 40% share of the project. It is understood that smelter
grade alumina will make up the bulk of the estimated
600,000 tpa production.
||Bauxite, Arkansas, USA
||in August 2010 the company was given approval to
enter into a debt restructure plan funded by parent
company Dubai International Capital (DIC), replacing an
initial debt restructure proposal by Oaktree Capital. At
the time of press, Almatis is expected to file for
Chapter 11 bankruptcy to provide protection against
creditor action while the debt restructure process is
underway. Regarding its operations, in March 2010 Almatis
announced that it would close most of its speciality
hydrates production unit at the Bauxite, USA plant, with
calcined and tabular grades unaffected. In July this year
the company celebrated 100 years in the NMGA market.
||hard burned calcined alumina
||Little Rock, Arkansas, USA
||recently opened a new $8m. calcined alumina facility
to produce hard burned grades for the ceramic, glass and
refractories markets. Aluchem said the plant would allow
the company to grow a part of its business which had been
constricted by its ability to buy calcined alumina from
other producers. Little Rock capacity is expected to be
|Axens, Rio Tinto Alcan
||Brockville, Ontario, Canada
||in August 2010 French chemicals group Axens announced
its purchase of the alumina hydrate plant in Brockville
from Rio Tinto Alcan, following RTAs completion of
a strategic review. RTAs only North
American plant is now Vaudreuil.
|Exploration Orbite VSPA Inc.
||Cap-Chat, Quebec, Canada
||evaluating production of speciality alumina (99.99%
purity) grades from an aluminous clay deposit in Quebec.
Orbite has established a pilot plant with initial
production at 1 tpd, expected to increase to 5-10 tpd in
2012 and 50-100 tpd in 2013-2014.
|JSC Uzbekugol, JSC RUSAL VAMI (j-v)
||alumina, alumina cement
||Tashkent region, Uzbekistan
||a joint-venture between Uzbekistans coal and
lignite producer, JSC Uzbekugol, and JSC RUSAL VAMI, the
Russian National Aluminium-Magnesium Institute in St
Petersburg, is proposing a project to produce alumina and
alumina cement in Tashkent. The plans call for
construction of a $900m. alumina cement plant with a
500,000 tpa alumina capacity and 7m. tpa alumina cement.
Plant completion scheduled for 2015.
|MAL Hungarian Aluminum
||in July 2008 MAL acquired 10-year concession rights
for exploration and extraction of a bauxite deposit in
Niksic covering 17.4 km2. MAL expects to begin extraction
in 2010 once drilling has been completed on the property,
with the Niksic bauxite targeted to supply its alumina
refinery in Ajka. MAL is aiming to supply the Ajka
refinery with solely internally-produced bauxite. In
March last year the company cut calcined alumina
production by 15-20% citing conditions in the ceramics
and refractories markets.
||calcium aluminium hydrate carbonate
||recently opened a new 10,000 tpa production site for
the manufacture of mineral co-stabiliser ACTILOX, an
alumina hydrate filler used to stabilise PVC. The total
investment for the site was 18m., one of the single
largest in Nabaltecs history.
|Noranda Aluminum Holding
||Noranda recently purchased the remaining 50% shares
in the USAs Gramercy Alumina and Jamaicas St
Ann Bauxite, from partner Century Aluminum Co. Gramercy
primarily supplies smelter grade alumina, but 350,000 tpa
of its 1.2m. tpa capacity is directed to NMGA
|PT Indonesia Chemical Alumina
||West Kalimantan province, Borneo
||this chemical grade alumina company is a j-v between
Indonesias Antam (65% owner), and Japanese
companies Showa Denko and Marubeni Corp. Still in the
construction stage, ICA aims to produce 300,000 tpa
chemical alumina. In May 2010 the WIKA Group was hired as
the contractor for the Tayan alumina plant. Parent
company Antam is seeking a $169m. loan to finance the
For similar reasons to refractories, ceramics saw a sharp slide
in demand towards the end of 2008 which has begun to recover
since the start of this year. Regional ceramics markets
typically follow a countrys GDP as they are linked to
industrial development and construction projects.
Almatis estimates that ceramics
will grow 4-5% globally this year, but believes that markets
could grow by as much as 10% depending on region.
The alumina producer sees other
ceramic growth areas in markets such as environmental
automotive applications, in demanding settings such as thermal
power plants and mineral processing areas, and also in the
electrical and electronics industries which are forecast
to be slightly above GDP growth.
Hans Bogaard, sales manager alumina
at Martinswerk GmbH, also sees increased demand for alumina in
ceramics applications. Bogaard revealed that Martinswerk, a
subsidiary of Albemarle, saw alumina sales increase 40% in H1
2010 compared to the same period in 2009.
In terms of market opportunities,
Bogaard believes there is a good chance for sales to
increase in the Far East region (China, India) mainly for
ceramic applications, provided the US dollar remains
strong against the euro. Challenges in the NMGA market will be
related to handling increased raw material and energy
Another specialist market for alumina is in the field of flame
retardants. Aluminium trihydrate (ATH) has gained popularity as
a flame retardant filler in the cable and wire market over the
last decade and market outlook appears to be good.
One of the main drivers of
ATHs increased usage is the phase-out of halogenated
flame retardants in Europe and elsewhere.
Demand is rising for the
higher added-value products, especially fine precipitated ATH
and reactive aluminas, Gerhard Witzany, member of
Nabaltecs management board, told IM.
The rise in demand is worldwide, but focused in
Witzany revealed that Nabaltec, a
leading producer of ATH, has forecast an increase in demand for
halogen-free flame retardants at around 7-8% a year,
particularly as more countries are expected to implement
environmental regulations against the use of halogenated
Production of flame retardant
fillers is close to 1.7m. tpa, with around 60% of this
comprising halogen-free fillers. Metal oxides are one of a
group of four halogen-free FR fillers, and within this subgroup
ATH production is estimated to be close to 700,000 tpa.
Across the board, the main challenge NMGA producers foresee in
the short-term is low availability of raw materials.
Rio Tinto Alcans Huguet
commented: The challenge is clearly the balance between
demand and supply. After strong curtailment programmes
undertaken in late 2008 and 2009, producers faced a sharp
increase in demand during the first two quarters of
This led to longer lead-times
for the different types of NMGA. The key challenge for the end
of 2010 will then be the sustainability of this recovery, as
well as the production capacity increases, Huguet
Raw material issues are
particularly affecting markets such as ceramics and
refractories, which face several months of lead-time for
Fortunately, the NMGA market could
be boosted with additional supply from several projects that
are currently in development.
PT Indonesia Chemical Alumina (PT
ICA), j-v subsidiary owned by Indonesian state miner Antam
(65%), and Japanese alumina producers Showa Denko and Marubeni
Corp., is evaluating a 300,000 tpa calcined alumina plant in
West Kalimantan province, Borneo. In May 2010 the WIKA Group
was hired as a contractor for the construction of the Tayan
alumina plant, which is aiming to supply Indonesian and
New capacity is also on stream in
the USA following the opening of Aluchems hard burned
calcined alumina plant in Little Rock, Arkansas. The $8m.
facility has a capacity of 75,000 s.tpa and is targeting sales
to the ceramics, glass and refractories markets.
Also a sign of the promising market
conditions is Nabaltecs decision to open a 10,000 tpa
alumina hydrate plant in Schwandorf, Germany. The facility
produces calcium aluminium hydrate carbonate filler used to
These are just a selection of the NMGA projects recently
completed or under evaluation. This relatively niche industry,
estimated to total almost 6m. tpa, represents a good investment
option for the financial sector. In all of its primary markets
demand has returned, and in some cases (ceramics and
refractories) consumption is already exceeding supply.
Considering also that Chinas grip on the market is
receding; alumina has become even more attractive to producers
in the rest of the world.
Alumina at a glance
The non-metallurgical grade
alumina (NMGA) market is estimated to total about 5.5-5.8m.
tpa, with about 2.8m. tpa of this defined as
speciality or premium alumina grades.
The remainder (and bulk) of the market is termed
commodity hydrate and includes products such as
ground white bayer and aluminium sulphate (Figure
Of the premium section, the
main product is calcined alumina, which is largely consumed in
the refractories and ceramics industries (Figure 3).
Alumina aggregates such as tabular alumina and white fused
alumina are the second largest product group of the speciality
grades, with end markets in refractories and abrasives, while
the third major speciality product line is hydrates for flame
retardants and fillers.
trihydrate: produced from bauxite via the Bayer
process, ATH is the starting product for all alumina
derivatives. From its initial formation, ATH can undergo a
series of processing steps (calcination, milling, fusion,
pelletising) to create the grades discussed below.
generally manufactured by calcining ATH in rotary kilns at
about 1,400ºC. A wide range of calcined alumina grades are
available with varying alumina contents, crystal sizes, soda
levels and morphology. Low soda grades are extensively used in
electronic applications, such as spark plugs.
also termed sintered alumina, tabular alumina refers to
calcined alumina with an alumina content close to 100% that has
been sintered at close to the alumina fusion point
(2,040ºC). Sintering forms large (50-500µ), flat
tablet-shaped corundum crystals. Usually manufactured in shaft
manufactured by melting at temperatures in excess of
2,000¡C. Brown fused alumina is sourced from calcined
bauxite, while white fused alumina is produced from high purity
calcined alumina. The grades are largely consumed in abrasives
Alumina prices outlook
Prices for calcined and hydrated grades of alumina have
remained fairly stable throughout 2009 and H1 2010 following
sharp drops in late 2008 and early 2009, which occurred on the
back of poor demand from end use sectors such as ceramics,
refractories and flame retardants.
These trends were in contrast to
the external price pressures experienced by producers, whose
raw material and energy costs dictated that price increases
were necessary. Because of poor market conditions, however,
many intended price increases did not occur Ð and these are
only now being implemented, two years later.
In many markets it is predicted
that alumina prices will increase in Q4 2010, with estimations
One European ATH producer told
IM: Price increases are scheduled for
the fourth quarter to compensate last years price
concessions and cover production cost rises. We expect prices
for alumina will rise by 10Ð15% in Q4.
Another Europe-based calcined and
tabular alumina producer commented: For H2 2010 we
anticipate speciality alumina price increases in the range of
4-5%, influenced by much more stable market conditions and
driven by the higher input costs which have not been passed on
to the market since 2009 Ð such as feedstock costs,
freight, energy and other major cost drivers.
Industry participants have reported
that the supply of speciality grade aluminas has become
constrained due to an uptick in demand from the refractories
industry during the past quarter, which has taken manufacturers
Producers have not been able to
bring on enough capacity in time to meet the extra demand.
The increase in demand from the refractories industry
was unexpected and has taken us by surprise to some
extent, said a US producer. Increasing demand for
feedstock alumina from the metallurgical industry has not
however been an issue.
Figure 6: Alumina price ranges, August 2008 to August