Bauxite and alumina: Year in Review 2015

By IM Staff
Published: Monday, 21 December 2015

A roundup of the year's main events in the global bauxite and alumina industries.

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.