Bauxite & Alumina '17: Chinese reliance on bauxite imports to grow

By Davide Ghilotti
Published: Monday, 03 April 2017

As the country’s own bauxite deposits are running low in high-grade ore, Chinese companies require a larger share of foreign material to meet internal demand, which is expected to lead to higher operational costs for local processors in the mid-term.

The depletion of China’s bauxite resources will increase the country’s reliance on imported material and affect operational costs for local companies, IM heard on the sidelines of the 23rd Bauxite & Alumina conference in Miami, US, in March.

"It’s quite clear that China’s dependence on imports in bauxite has increased in recent years, and this dependence will grow," a source active in bauxite and alumina told IM in Miami.

"They have had to dig deeper and deeper to reach the ore, and not a lot is easily available now," said a second attendee. "Chinese bauxite resources are being depleted. They are looking for more deposits but, otherwise, they’ll just have to import more."

According to delegates, maintaining the required purity standards of bauxite raw material is becoming harder within China because best-quality ore in known local resources is now limited, after many years of extraction.

This is reflected in the need for higher volumes from outside the country. While China has steadily imported bauxite (around half of national demand is covered by imports), sources claim the ratio of local resources to imports could change as domestic supply declines.

China’s imports of bauxite decreased in the second half of 2016, on the back of slow metallurgical and refractory markets. At the same time, sources claim that the domestic lack of material is an underlying trend that will become evident once internal demand rebounds.

"Now, with the issues you see on the metals side in China, this is dampening demand for bauxite so they can handle it. But once demand stabilises or goes back up – and it will eventually happen – that’s when you’ll see how much less they actually have," said one delegate.

Another delegate added: "We estimate that by 2020 or thereabouts, they will hit the wall. It will become too expensive to mine and refine [local] low-grade ore."

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Delegates once again visited Miami to discuss the bauxite and alumina market. 

Low-grade leftovers

IM has heard cases when, to maximise returns, some local companies chose to mine only the highest-grade ore from their deposits, leaving non-premium grades in the ground. This practice was not uncommon in recent years, when market prices have been low.

At the same time, this created a scenario in which a number of local deposits are now devoid of premium grade ore and only have low-grade material, the extraction of which is now uneconomical.

"It’s feasible to go back in and extract the rest of the stuff – you can do that if you want. But it’s not worth it, since they took the best material beforehand, and cannot make a profit by selling the low-grade stuff," the first delegate said.

What this combination of factors may lead to is an increase in raw materials and sourcing costs for Chinese processing facilities, either through a higher share of imports or through additional refining costs for the lower-grade ore mined domestically, to reach the specifications required.

In the case of imports, refineries that are located in internal areas within China, far from the main ports – such as Shanxi – could see their logistics costs rise, while those based close to the coast would be best positioned.

"Either way you look at it, costs of local companies will grow," the second delegate added.

Looking to fill the gap

Today, China’s bauxite needs are covered by a number of producing countries.

"Suppliers such as Indonesia [prior to the 2014 ban], Australia, Guinea and also Malaysia all stepped in," one source said.

Indonesia was previously one of the leading suppliers of bauxite to China, until it banned exports of unprocessed ores in early 2014, after which Malaysia led supply and saw its output and exports quadruple in a couple of years.

Malaysia has also now blocked extraction and exports of bauxite, in a bid to reduce inventories and curb the environmental damage that unregulated mining operations brought about on local water resources.

With both players temporarily out of the game, Australia has solidified its leadership as top bauxite supplier to China. Guinea also gained in prominence and is now a growing exporter to the Asian country.

Bauxite is mined in a number of provinces in China, with the largest deposits in Shanxi (42% of the country’s total), Guizhou (17%), Henan (17%) and Guangxi (16%).

Exploration is continuing in several areas of the country in search of untapped bauxite deposits.