While the protracted slowdown in the global price of
aluminium is making like difficult for the majority of the
world’s bauxite industry, the contraction in world
steel output has been hammering producers of non-metallurgical
grades of the mineral.
2016 began with a raft of foreboding news for both sectors.
China is considering cutting its aluminium output by 11m tonnes
after profitability in the sector fell to zero at the end of
last year; Brazil reported that its exports of metallurgical
bauxite fell by 8% in December; Glencore Plc’s
US-based Sherwin Alumina business filed for bankruptcy; and
Guyana’s Minister for Natural Resources, Raphael
Trotman, complained publicly that the country’s
bauxite sector had "underperformed" in 2015.
Most of the world’s non-metallurgical bauxite
is sourced from Shanxi province in northern China, with smaller
volumes coming from Guyana. It is primarily used in
refractories for the crude iron and steel industry –
which accounts for around 70% of the market – and
consumption has followed the negative trend in steel output.
Reliable production figures for refractory bauxite are
difficult to calculate, but analysis by Roskill Information
Services shows that while exports from China have fluctuated,
prices have been sliding steadily.
"Chinese exports of refractory grade bauxite are projected
to have been 840,000 tonnes in 2015 – compared to
868,000 tonnes in 2014 and 768,000 tonnes in 2013," Jess
Roberts, senior analyst at Roskill, told IM.
"Similarly, 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."
Roberts pointed to the demise in refractories output as a
contributing factor to the price erosion. "Overall,
refractories production has fallen by more than 15% since 2011,
when output was 42.7m tonnes, and the majority of the reduction
is due to lower production from China. Most Chinese
refractories are produced for domestic consumption, hence the
decline we have seen in the domestic market is directly linked
to the slowdown of China’s crude steel, cement,
non-ferrous metals and glass sectors," she explained.
Only around 15-20% of all the bauxite
produced globally is consumed by non-metallurgical
applications and only a small number of deposits can
produce material suitable for use in refractories
Rough road for refractories
One market source, who buys refractory grade bauxite from
China mainly for customers in North America, told
IM that production of Chinese material has not
decelerated at the same pace as refractories manufacturing,
resulting in oversupply which is putting further pressure on
"The picture of non-metallurgical bauxite is pretty bleak,"
the source said. "I don’t see the refractories
market ever regaining the ground it’s lost. Even
if new markets do open up, like Africa or Iran, specific
consumption of refractories per tonne of steel is reducing all
the time, so there will have to be some structural cutbacks. I
think we can rely on the Chinese government to phase out some
capacity, but there will be some pain to get through
Others are more sanguine about the state of the market, at
least from a trading perspective. Germany-based trader,
Cofermin Group, last year launched a new subsidiary business
called M!NERALS, which focuses on sourcing what it calls
"classic" Chinese industrial minerals, including bauxite, for
M!NERALS’ managing partner, Robin Steger, sees
China’s move to offload more of its excess bauxite
production as an opportunity. "We aim to trade around 50-55,000
tonnes non-metallurgical bauxite per year," Steger told
IM. "It is all Chinese material for the time
being. As we only founded M!NERALS in January 2015, we are
still ramping up, but have already achieved a significant part
of our target in the first year," he said.
Despite their slowing growth profiles, M!NERALS is looking
to establish itself as a supplier to traditional
bauxite-consuming industries before potentially branching out
into more speciality applications. "The markets we focus on are
refractories, steel, foundry, insulation and cement. So we are
talking about commodity trade and big quantities – we
have not specialised in niche markets intensively so far."
Other industry observers concede that
Cofermin’s decision to gain a handle on
China’s shift from major market for, to a source
of, bauxite makes good business sense. However, one trader told
IM that they believed some Western producers
of bauxite-based refractory materials invent problems regarding
the quality of Chinese and Guyanese bauxite to drive down
prices from suppliers, while pedaling myths to customers about
the reliability of supply, in order to demand higher selling
Such allegations have been roundly dismissed by refractories
producers, who said that supply chain transparency is becoming
more critical when margins are so tight and industry
competition is fierce. "If a customer finds out they have been
misled, they can easily switch to another supplier," one source
said. "In a small industry, you don’t run risks
like that, not now."
A desire for transparency is one of the reasons why Cofermin
– and its M!NERALS arm – has found a ready
market for its services in the industrial minerals industry.
Steger suggests that while the sector is undergoing several
important shifts, consumers are looking for reliability in
areas that previously they may have found difficult to control,
such as sourcing.
"2015 was a year of change, with many personnel fluctuations
in the management of the key market players," Steger told
IM. "We are the new player in this market and
we set ourselves up to be very lean, to be in a position to
avoid additional costs – particularly overhead costs,
which bigger companies have to factor in – and to pass
this price advantage through to our customers. This makes them
more competitive in their business with, for example, steel
mills or foundries, without changing the source or quality
they’re used to consuming."
|With operations in China and Guyana,
Bosai Minerals is one of the only companies to currently
supply non-metallurgical bauxite from a non-Chinese
source (source: Bosai/IM).
Assured from Shanxi
In early 2015, IM reported on allegations
of tax evasion among bauxite producers in Shanxi. Companies
were said to be conducting cash-only deals in order to sidestep
VAT and cut the selling price of their material by up to
However, according to Steger, these irregularities have so
far not affected M!NERALS. "We have never been touched by those
issues and, as far as I know, our Chinese partners were not
affected or involved in that story," he said, adding,
cryptically: "Sometimes, when people get too greedy they risk
their existing business. We run a stable and reliable network
and would never risk to harm ourselves or our partners like
As for the allegedly unreliable supply of refractory grade
bauxite from China, Steger feels this is more often to do with
the supply chain itself, as well as material sources.
"Unreliability is always caused by a various number of
uncontrolled sources or when traders change the source to a
cheaper one to obtain a lower purchasing price," he said.
"We’ve known our sources for many years and
(…) they are very aware of the quality needed and we are
very aware that a reasonable and steady quality of course comes
at a certain cost. It appears easy to 'squeeze’
material’s price under the cost level, but the
right way to achieve customer’s demand on pricing
is to review the costs of the whole supply chain from the mine
to the application."
Sources reported flat to steadily declining prices for
non-metallurgical bauxite over the course of 2015, with the
slide in the material’s value accelerating towards
the end of the year. Few market participants expect this trend
to reverse this year.
In 2014, some suppliers had mooted the idea that the demise
in the price of bulk refractory grade bauxite was being
partially compensated by a rise in demand for ceramic proppants
in the hydraulic fracking industry. Today, with crude oil
prices sinking below $30/barrel (bbl), compared to around
$120/barrel in mid-2014, these predictions have tailed off.
Steger agrees that bauxite prices are under strain. "Chinese
pricing decreased over the whole year," he said. "What we
observed in the refractories industry, is that they face a high
price pressure from the steel industry."
Unlike some, he is hopeful that the market has now at least
reached a floor. "We expect that export prices will follow
local consumption. Prices have already reached a very low level
and it would not be good for the Chinese bauxite industry if
prices dropped further. Having reached a kind of bottom, we
cannot imagine that the price development from 2015 will
continue that much more," he said.
Looking ahead, Steger also has also noticed shifts in the
supply of refractory grade bauxite, which could alter the
dynamics of the industry. "We have observed that, after many
years, material from Guizhou in southwest China is coming back
to the market. Guizhou material was not properly accessible for
the last couple of years. It is a little different in quality,
but still interesting for the refractories industry, due to its
purity and has been used for refractories in the past. This
might become a third option, next to Guyana and Shanxi," he
Bauxite for ceramic proppants
According to Roskill’s Roberts, 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.
This is despite the sudden drop in oil prices from over 100/bbl
in June 2014 to below $30/bbl by the end of January 2015, which
had a sharp impact on ceramic proppant consumption –
around half of which is used in North America.
The use of calcined bauxite in proppant production grew by
more than 35% per annum between 2011 and 2015, Roskill
estimates show, and proppants now represent the second largest
market for non-metallurgical 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, there could be good potential for ceramic proppant
consumption to increase in China. The largest domestic Chinese
hydrocarbon resources in China are 5,000 metres deep or more,
and so will require high-strength proppants.