SSR: Refractory grade bauxite banking on China

By Kasia Patel
Published: Tuesday, 27 August 2013

China dominates global production of refractory bauxite, accounting for 77% of the market share in 2011. Other major producers are Russia, accounting for 9% of refractory bauxite production in 2011, Guyana with 6% and India with 7%. Brazil accounts for about 1% of market supply.

SUPPLY SECURITY

China dominates global production of refractory bauxite, accounting for 77% of the market share in 2011. Other major producers are Russia, accounting for 9% of refractory bauxite production in 2011, Guyana with 6% and India with 7%. Brazil accounts for about 1% of market supply.

Most of the production of calcined bauxite in China, which includes abrasive and refractory grade bauxite, takes place in the Guizhou, Henan and Shanxi regions through about 20 producers.

According to Lee Bray, bauxite and alumina analyst for the US Geological Survey (USGS), the biggest issue facing producers is the restricted supply of refractory grade bauxite, and a strong dependence on China.

“Probably the biggest issue is availability because China is such a large source of refractory grade bauxite and it has had export barriers in the past, such as quotas on the volume and export taxes, which have been a concern in the past,” he told IM.

In January 2012, the World Trade Organization (WTO) found China guilty of restricting trade of certain key steelmaking minerals, including refractory grade bauxite. The findings meant that the Chinese government had to remove charges and restrictions, which the European Union (EU), Mexico and the US were claiming had unfairly restricted the flow of these industrial minerals onto world markets.



The restrictions inflated global prices, while reducing prices in the Chinese market, giving Chinese companies consuming these materials an unfair advantage against foreign competitors, effectively violating China’s commitments made upon joining the WTO in 2001 on trade liberalisation.

While the cancellation was greeted with relief from global bauxite consumers, many suspected that the Chinese government would find alternatives to recoup its lost revenues, and Bray questions whether a marked difference has been made.

“The ruling by the WTO concerning those exports essentially forced the Chinese government to lift those export barriers. Whether or not more bauxite is going to make its way into the market in light of those rulings from the WTO, I think is still yet to be seen,” he told IM.

“My understanding is that there is still some concern over availability. China is one of the main suppliers but there really aren’t a lot of other suppliers outside of China and Guyana for refractory grade material,” he added.



Chris Wragg, group supply chain manager for Capital Refractories, adds that another difficulty for refractory producers sourcing refractory grade bauxite, is the lack of industry standards across materials.

“In the world of refractory materials supply, many materials are relatively specialised and with no industry standards, there are often few suppliers of the same products. One consequence of this is it makes the world of refractory raw materials supply a rather smaller place than might normally be expected,” he told IM.

He explained that unlike the supply of some industrial minerals, where suppliers are located near to each other providing a similar standard of material that is fully interchangeable, many refractory materials are unique. This, he says, forces consumers to source on a global scale to satisfy their needs.



Outside China

Russia accounted for around 9% of refractory bauxite production in 2011, much of which was used domestically for high alumina refractories in the iron and steel industries.

The bulk of production comes from JSC Severo-Onezhsky Bauxite Mine (SOBR) in Arkhangelsk, and new production came on stream from UC Rusal in 2012.

With 6% of the refractory bauxite market share in 2011, Guyana is another important source of supply and the main competitor to Chinese material. Roskill estimates that production levels were around 180,000 tonnes in 2011.

The country’s major refractory bauxite producer is Chinese-owned Bosai Minerals. Future production will potentially come through First Bauxite Corp.

Accounting for 1% of the refractory bauxite market, Brazil produces a small amount mainly for use in the domestic market.

Refractory grade bauxite from India is mainly sourced from Gujarat State. The country accounted for 7% of market supply in 2011, with production of around 200,000 tonnes. Major producers include Ashapura Minechem, Bombay Minerals Ltd, Gujarat Development Corp. and Orient Abrasives.



MARKET DEMAND

In recent years, refractory production has shifted to emerging markets with an increased production in China.

As the largest end market for calcined aluminas, refractories accounted for just under 60% of the market share last year. Ceramics accounted for around 24% of the calcined alumina market in 2012, while abrasives accounted for just over 10%.

“Demand for refractory grade bauxite is of course related to output in the steel industry, which has been growing a little bit in the past couple of years,” Bray says.

Global crude steel production is the largest end-market for refractory minerals such as alumina, andalusite, bauxite, graphite, magnesia and zircon, accounting for around 70% of world refractory consumption. Crude steel production has been driven mainly by growth in Asia, which has offset weak production in the CIS and EU.

Recent figures from the World Steel Association (worldsteel) indicate that year-on-year (y-o-y) global crude steel production has increased by almost 2% in 2013. As the largest producer, China’s crude steel production grew 6.2% to 65.5m tonnes. Asia accounted for over half of world production with a total of 89.1m tonnes. India saw similar growth to that of China, and a smaller increase was seen from Japan.

The Middle East also saw large increases, with the region growing by 23.4% to almost 2m tonnes crude steel, a figure buoyed by a 64.5% increase y-o-y from Saudi Arabia, which produced 464,000 tonnes in July.

Negative trends continue in the EU, Turkey and Russia however as these were all regions to record declines yet again.

Crude steel production for the US increased by 3.3% y-o-y to 7.6m tonnes, though the overall increase for North America was just 0.1% due to declines from both Canada and Mexico.

“Whether or not demand in the US is enough to justify further capacity, I'm not sure, and of course there’s the cost issue,” Bray told IM.

“It might be still cheaper to import material from China than it is to mine it here in the US, so there are various factors playing into whether or not domestic output will increase,” he added.

The refractories industry is forecast to grow out to 2017, and Roskill predicts that it will stabilise towards the end of 2013, with recovery beginning from 2014. This will offer some opportunities for growth in refractory bauxite grades, particularly in China.

A new report by Materials Technology Publications forecasts that world refractories production will increase from 41.5m tonnes to 46m tonnes with much of this driven by China.

However, the unit consumption of refractories per tonne has fallen and total consumption of refractory grade bauxite has been declining globally over the last few years.

Disappointing growth in the steel industry aside, changes in technology - such as a shift from shaped bricks to monolithic and a move from bauxite-based refractory bricks in larger applications, like steel ladels, to the use of basic refractories such as magnesia and dolomite - have also contributed to lower consumption.

Steel industries within developing countries are adopting more sophisticated technologies and replacing old refractory plants. All of this means that although there will continue to be growth in demand for refractories, and so creating opportunities for refractory grade bauxite, this is likely to be at a slower rate than before.



PRICE TRENDS

Prices of non-metallurgical bauxite depend on the composition of the material, which determines the end use, and the country of origin.

“Refractory grade is a higher price, and it depends on the source. The material in the other grade has a wide range of composition in terms of its silica content and alumina content so if you look at figures from 2011, the imports into the US from Greece were probably the lowest price per tonne, you'll find there’s a wide range,” Bray told IM.

As the lowest purity material, cement grades have the lower price in terms of non-metallic bauxite.

At the end of 2012 and early 2013, prices for calcined bauxite out of China increased by around $8-15/tonne due to the tightening of raw material supply. Pressure from the WTO, which led to the cancelling of bauxite licences for 2013, stimulated higher demand for bauxite exports. This is turn led to price increases.



MARKET OUTLOOK

The alumina refractory market is expected to grow at a rate of 2.8% CAGR between 2012 and 2017, however the refractories industry has still faced difficulties due to rising energy costs, increased raw materials and poor steel industry demand.

As high alumina refractories used in the steel industry are the main end market for refractory grade bauxite, demand and growth will remain closely linked to the steel industry. Future demand is expected to come from Asia - specifically from China and India - Brazil, and the Middle East.

Much of the production of refractory grade bauxite in India is consumed domestically however, and increased demand in the country means that domestic consumption is likely to continue.

“I have heard talk that India may have some deposits that are suitable for use as refractory grade material and I would expect that those would be developed,” Bray told IM.

“The problem that occurs with India is that it sometimes has regulatory hurdles to new developments, it’s a very complicated bureaucracy with the Indian government, so developments of new projects in India are possible in the future but it’s a matter of the political climate,” he added.

In terms of other potential future production, with increasing demand increased production in Brazil is also a possibility.

“There are some other regions of the world that might have potential for refractory grade bauxite. Brazil for instance - they’ve produced in the past and it’s my understanding that they are not producing anymore, but they may have some reserves of refractory grade bauxite that have not been developed yet,” Bray told IM.

Bray added that increased production of refractory grade bauxite in the US is unlikely.

“As for the deposits in the US, I don’t know if they really have the capability of increasing their output. My understanding is that they probably wouldn’t have a lot more production in the future,” Bray said.

“Bauxite is a good example of where too much of the global supply is controlled from too few places. I’m sure that many users would welcome a new source of good quality refractory grade bauxite,” Wragg told IM.

There are a number of expansion projects planned in India, Brazil and Russia but much of this new capacity is likely to be consumed domestically due to increased internal demand. Therefore, though new refractory grade bauxite supply would be welcome to decrease reliance on China, consumption is likely to remain dependent on output from China and Guyana.