Two years ago, Indonesia imposed restrictions on exports of
unprocessed bauxite in an effort to force companies to develop
smelters that would make the country self-sufficient and create
jobs. However, many firms including bauxite miners, said
building smelters was unfeasible in the absence of supporting
infrastructure and export revenue and the
country’s income from mining dropped in 2015,
according to media reports. Meanwhile, issues with production
and irregularities in export practices from the
world’s most important refractory bauxite mining
region, China’s Shanxi province, are continuing to
warp the supply chain, although weak demand conditions staved
off any impact on prices.
SUPPLY SECURITY
Indonesia’s ban on bauxite exports, implemented
in January 2014, failed to have an impact on non-metallurgical
(non-met) bauxite in 2015. There were some concerns that the
embargo on unbeneficiated ore would curb availability of
non-met bauxite grades from China, because of
China’s reliance on Indonesian bauxite for
domestic alumina production.
According to Jess Roberts, senior analyst at Roskill
Information Services, the main concern was that non-met bauxite
would be diverted to domestic alumina refineries to plug a
possible supply gap. "As it later transpired, growth in the
Chinese alumina and aluminium industry was not as high as had
been forecast. In addition, Malaysia rapidly expanded its
production and exports of met-bauxite and was able to replace
nearly half of the volumes lost by the Indonesian export ban,"
Roberts said.
Roskill’s recent analysis indicates that
Malaysia increased its bauxite shipments to China from 3.7m
tonnes in 2014 to an estimated 24.8m tonnes in 2015. China also
imported higher bauxite volumes from Australia, India and
Brazil.
In March, it was reported by the Jakarta Post that
the Indonesian government was considering scrapping the ban,
after tax revenues from exports fell. Government advisors
reportedly mooted lifting the ban to provide funds to finance
the construction of aluminium smelters. However, at the end of
2015, the policy remained in force.
The big news of 2015 for the alumina industry was the sale
of Germany-based alumina producer Almatis to
Turkey’s largest private pension fund, Oyak Group.
Terms of the transaction were not disclosed, but sources cited
by Reuters indicated the deal was worth around
$1bn.
Almatis’ CEO at the time, Taco Gerbranda, said
the acquisition would strengthen the company’s
leadership in the premium alumina industry. It is not clear
what Oyak has in store for Almatis, but at the end of 2015, the
pension fund announced that it had appointed Henning Stams as
the company’s new CEO.
Also in the speciality alumina field, Orbite Aluminae Inc.
rebranded itself as Orbite Technologies Inc. in what proved to
be a busy year for the company, culminating towards the end of
the year with the receipt of a number of patents for its
process for extracting high purity alumina (HPA) from bauxite
red mud waste.
In Australia, Altech Chemicals Ltd continued to progress the
development of its Meckering kaolin project in Western
Australia to supply its 4,000 tpa HPA project in Malaysia. The
company said in December it had expanded the inferred mineral
resource at Meckering to 85m tonnes at 85.1% brightness.
Also in December, TSX-V-listed First Bauxite Corp. announced
that it had been given a two-year extension on the construction
start date for its proposed Bonasika ceramic proppant project
in north Guyana. The date will now be extended from 31 January
2016 to 31 January 2018. First Bauxite plans to ship
material to be processed into proppants in Louisiana,
US.
MARKET DEMAND
In 2015, overall refractories output decreased by more than
15% compared to 2011 when production stood at around 42.7m
tonnes. Most of this reduction was due to lower production and
domestic demand from China.
Roskill forecasts that Chinese crude steel output will
decline by around 0.4% per year over the next five years. This
will negatively impact Chinese refractories production and will
have a knock-on effect on demand for refractory grade bauxite
and alumina, although speciality calcined aluminas may benefit
from a broader trend towards higher quality refractory
materials.
End markets for speciality aluminas, including refractories
and technical ceramics, experienced slight volume increases in
2015, compared to the previous year. Germany-based speciality
alumina company Nabaltec said demand for the material increased
in the higher single-digit range in 2015.
One of the notable highlights of the non-met bauxite market
in the last five years has been its use in ceramic proppants
for fracking. However, the drop in oil prices from over $115 a
barrel in June 2014 to $45 at the end of November 2015 has had
a sharp impact on ceramic proppant consumption, around half of
which is used in North America. According to Roberts, the use
of calcined bauxite in proppant production grew by more than
35% between 2011 and 2015 and proppants now represent the
second largest market for non-met bauxite. Most ceramic
proppant production based on a bauxite feedstock occurs in
China (North American output is primarily
kaolin-based).
While consumption of ceramic proppants in North America has
slowed down and will likely take a couple of years to recover,
consumption could increase in China if fracking of
China’s 5,000 metre-deep hydrocarbon resources
gets underway.
PRICE TRENDS
The average export price for Chinese refractory bauxite was
$229/tonne between January and October 2015, down from
$252/tonne in 2014 and $260/tonne in 2013.
Alumina prices were reported to be stable but are expected
to decrease next year, due to low global demand for
refractory-grade material.
MARKET OUTLOOK
Slow recovery in the global steel industry will have a
negative impact on demand for refractory minerals, including
bauxite and alumina. No significant shifts in the markets for
alumina and bauxite are expected, with a gradual decline likely
to be observed in both sectors, led by steel production
patterns. The World Steel Association (worldsteel) has forecast
that global steel demand will increase by just 0.7% in 2016, to
1.52bn tonnes.
As steel producers lean towards higher quality refractories,
demand for speciality alumina is forecast to grow. Andreas
Buhr, global technical director of refractories at Almatis,
said new commercial opportunities for producers of HPA products
are emerging, helped by the development of new high purity
steel grades.
Johannes Heckmann, member of the board at Nabaltec, also
remains optimistic: "Even though the refractories industry [is
suffering] due to low steel production in Europe, we as
producers hope that the usage of speciality aluminas in the
refractory industry continues to grow," he said.