Calcined bauxite: In the hands of a few

By Liz Gyekye
Published: Thursday, 22 October 2015

Change is a constant in the industrial mineral world, but it is accelerating in some sectors in particular – a fact that has implications for the calcined bauxite supply chain. Liz Gyekye, Chief Reporter, investigates.

Calcined bauxite is a raw material primarily used in the refractory and abrasive industries. The product is also used in other applications, including proppants and welding fluxes.  

There are no official global figures on non-metallurgical (non-met) bauxite and barely a handful of countries produce the material. Estimated world bauxite production for 2014 was 244m tonnes, according to the US Geological Survey (USGS), while global bauxite reserves are 28bn tonnes.  More than 95% of bauxite production goes into metallurgical uses, mainly to be converted into alumina for the aluminium industry. 

Refractory-grade bauxite production is estimated to be around 2m tpa. Guyana and China are the top producers of calcined bauxite for refractories. According to the USGS, Guyana produced around 1.6m tonnes bauxite, which includes refractory grade bauxite, in 2014. In 2012, global reported bauxite production peaked at 2.2m tonnes. 

Even though there are no clear figures on current production of calcined bauxite from China, IM understands that the country remains the leading supplier of the material. It is estimated that China produces more than 3m tpa calcined bauxite for the refractories, abrasive and welding sectors. Bosai Minerals Group Co., claims to be the largest producer of calcined bauxite in China, with a refractory bauxite mine which has a capacity of 600,000 tpa.

China watch

China, the largest consumer and producer of many of the world’s natural resources, is facing a slowdown in its economy, which has is having an impact on calcined bauxite consumption. Raymond Ding, CEO of Chinese mineral trader Wuxi Ding Long, says that domestic demand for calcined bauxite is declining as industries such as the steel sector require fewer refractories to produce steel.  

He adds that due to environmental protection measures, manufacturers in China are required to improve processing equipment and raw material quality, which brings extra production costs. This has caused some suppliers to reduce or stop processing calcined bauxite. "As a result of this, it is obvious that the processing capacity will keep going down in the near future if market demand doesn’t come back," Ding says.

Jess Roberts, senior analyst at Roskill Information Services, dismisses suggestions that supply of refractory grade bauxite is under threat. "Despite industry concerns in 2008 and 2011 that Chinese refractory-grade bauxite availability was declining, recent export data shows that Chinese shipments have continued to ramp up."

"Exports in 2012 totalled more than 610,000 tonnes at an average value of $308/tonne FOB China. By the end of 2013, exports increased to nearly 770,000 tonnes, but the average value fell to $261/tonne," she adds. "This trend continued into 2014, when exports surged again to nearly 870,000 tonnes, but values inched down slightly to $252/tonne. From January to August 2015, exports remained stable compared to the same period in 2014 at 560,000 tonnes, but average values have again slipped to $232/tonne."

According to Roskill’s analysis, Chinese consumption of refractory-grade bauxite has fallen in tandem with domestic refractories production, which has made more material available for the export market. However, with global refractories output also muted, there has been little support for prices and this has been reflected in falling export values – which typically reflect contract pricing.

Elsewhere, one market expert, who wished not to be named, says that the current situation for calcined bauxite from China is "complex and very messy". 

"A massive reduction in Chinese domestic demand for refractory and non-met usage has produced an oversupply of calcination and crushing capacity in China. This has led to prices falling," he says.

"The previous bottleneck of supply to the export market — the export licence system — has changed. Currently, an export licence is still required but anyone can apply for one. The licence is free of charge. What this means is that anyone can export bauxite."

The source alleges that export VAT is not being paid by some Chinese bauxite exporters which is causing massive differences in prices from different suppliers. The current price for calcined bauxite (min 88% Al2O3) after calcining is estimated at Chinese renminbi (Rmb) 1,540/tonne ($243/tonne*), without 17% VAT. IM understands that prices in general range from $250-$350/tonne.

Proppants

Brazil, India, Turkey, Greece and Russia also produce calcined bauxite. As well as being used for refractories, the material is used to produce proppants. These small ceramic beads, around the size of a grain, are pumped into hydrocarbon -bearing rock formations to "prop" open the fractures and stimulate oil or gas production.

The market for proppants is not as buoyant as was prior to the middle of last year, due to the decline in the oil price. All of the US major ceramic proppant producers have been forced to idle capacity in the face of falling demand, including Carbo Ceramics, which announced in March that it would mothball its 125m tpa proppant facility in Georgia, US. 

Earlier in the year, Carbo Ceramics’ CEO, Gary Kolstad, said the company’s actions were in direct response to low oil prices, which is having a negative impact on demand for ceramic proppant.

Alan Roughead, CEO of Canada-based First Bauxite, concurs with Kolstad. "Demand for sintered bauxite proppants is extremely weak following the decline in oil and gas prices and reduced levels of fracking activity and switch from ceramic proppants to cheaper sand proppants," he says. "There is a large amount of idled ceramic proppant capacity in US, China and other parts of the world. However, this idled capacity does present lower cost opportunities for new entrants into the market."

In conclusion, he says: "The market is expected to remain weak for some time but recover in the medium term. We are confident there is a future for high quality, high strength bauxite-based ceramic proppants."

*Conversions made October 2015