The market for calcined bauxite and fused alumina remained in
a state of limbo at the beginning of the fourth quarter due
to a continued lack of clarity over the extent of supply
issues in China.
Market participants are facing hard questions about the
continuity of supply from China amid a slowdown in demand from
consumers in Europe and other areas.
Limited availability remains an ever-present problem in that
it is proving difficult to quantify, resulting in wider spreads
on some market prices - particularly for bauxite - while other
grades remain firm or adjust in line with slow trading.
Fastmarkets IM’s price assessment for calcined
bauxite, 85%, was $410-430 per tonne fob China on Thursday
Meanwhile, the Fastmarkets IM price assessment of calcined
bauxite, 86%, stood at $430-450 per tonne fob China on November
15, nudging down from $435-450 per tonne earlier.
Finally, the Fastmarkets IM price assessment for calcined
bauxite, 87% at $450-480 per tonne fob China remained
unchanged, while the price of calcined bauxite, 88%, held at
$490-500 per tonne fob China, also unchanged from the previous
Most data points collected would suggest the spreads are
widening, as in the case of the 85% and 86% prices, which are
testimony to the lack of clarity in the industry at
"You hear numbers that are all over the place right now," a
In terms of availability, most market participants across the
supply chain have told Fastmarkets IM there are only limited
volumes of both calcined bauxite and fused alumina, largely
as a consequence of the latest series of temporary closures
and restrictions that mining operations and processing plants
faced in August-September in China’s Shanxi and
Shanxi is the production hub for bauxite, while Henan is
known for fused alumina.
With kilns across Shanxi either shut or operating at reduced
capacity in the August-September period as part of the
government’s ongoing crackdown on pollution, new
production of calcined bauxite has been low.
"Under normal conditions, the market would need about
2.5-3.0 million tonnes of bauxite in a standard year, and 1
million tonnes of BFA [brown-fused alumina]," one seller said.
"At these production rates, I would be surprised if output were
more than half of that."
After covering domestic demand, the diminished bauxite
output meant lower availability for the export market, as well
as reduced supplies of bauxite feedstock to producers of
brown-fused alumina in Henan. Together with
Henan’s own closures, temporary or otherwise (some
Fastmarkets IM sources estimated that as much as 50% of
producers in Henan are currently not operating), this has
slashed BFA production in the province.
"BFA output has been seriously down," one market source
While some volumes of bauxite have been shipped from Guizhou
province to feed local alumina smelters in Henan, the amounts
have been "negligible" compared with the standard volumes from
Shanxi, which is the larger producer.
"It’s not looking good," one seller said. "I
know we’ve been saying this for months, but
it’s hard to see how any of this could improve
in the near term."
When it comes to consumers, some sources point to what they
described as a disconnect between this situation in China and
the supposedly "relaxed" attitudes of the buyers.
"I don’t think many users are really aware of
the potential long-term effect of what is happening in China
right now," one importer said.
In the words of a European distributor, "We keep hearing
about the closures in China and we do believe that volumes are
lower. But if you ask for an offer, you will always get a few
[and] that perpetuates the confusion."
Most market participants reckon that all available material
in the past two weeks has come mainly from existing stocks in
China, with new production accounting for only a minor
Meanwhile, demand is currently low across most parts of
Europe because major buyers are said to be covered for the rest
of this year and the first weeks of 2019.
"Most of my customers have at least a six-month coverage
ahead at this point," a seller said.
A number of market participants told Fastmarkets IM there
may be quality issues with the available material - including
off-spec material being labelled as a certain purity although
the actual grade may be lower, or a product with high moisture
or high impurities, such as too-high silicon or iron
Additionally, at least three market participants said some
blending may be taking place, specifically for bauxite.
"When the perception is that availability is limited, you
will always have those that take some leftover stock [and]
blend it with some new volumes of lower-grade stuff from a
few places," one trader said, although he added that this
tends to happen with small cargoes.
Air quality in winter
As for China, the reduction in supply is likely to persist
due to Beijing’s environmental efforts.
The crackdown on pollution from heavy industry, and the
government’s environmental focus looks set to
continue as the pollution indicators for industrialized areas
The air quality index (AQI) for Luoyang, one of the main
cities in Henan province, stood at 139, or "unhealthy", on
October 16, while in Yangquan, Shanxi province, the AQI was at
170, also classified as "unhealthy".
Both indices showed breathable levels of fine particles
(such as PM2.5 and PM10) at dangerous levels throughout most of
the day and Beijing has made it clear time and again over the
past two years that curbing industry pollution in local
environments is a government priority.
Pollution levels in winter are normally higher than in the
summer months due to the worsening weather conditions and lower
This year, for the second consecutive year, the government
is imposing a series of restrictions on industrial operations
in key provinces for mineral production, including Shandong,
Liaoning, Shanxi, Henan and others. Last year, this meant
almost no production between mid-November and mid-March.
"With winter closures about to start, and most operations
running at low capacity in Shanxi and Henan, the availability
of [minerals including] bauxite and BFA is going to get even
tighter in the coming months," one supplier said. "Winter is