The performance of the refractory-grade bauxite
market was closely linked to supply restrictions in China in
2019, mainly due to reduced mining capacity and rigid
At the same time, a sluggish end-user refractory
market counterbalanced the supply tightness to some degree,
resulting in a relatively stable – albeit slightly
downward looking – market in recent months.
Mining of bauxite in Shanxi and Henan provinces
– two of the major production hubs for
non-metallurgical-grade bauxite ore in China – has
faced regular interruptions since 2016, as a result of
government efforts to bring an end to unregulated
In 2017, Beijing’s environmental
inspection body ruled that mines with an annual bauxite output
of less than 300,000 tonnes would be shut down, to remove the
outdated, small-scale capacity. That move was echoed by the
government in Henan province.
In Shanxi province, unauthorized and unregistered
mining operations were also under the spotlight and faced a
rigid inspection regime, with action taken at a policy level to
tighten the control of illegal mining.
While governmental efforts to improve order in the
industry is one reason for bauxite’s supply
tightness, there is also the matter of a reduction in
exploitable resources after years of unregulated mining. As one
bauxite ore producer in Shanxi province said: "At least one
large-scale mine in Xiaoyi city [one of Shanxi’s
bauxite mining hubs] experienced depletion."
The threat of bauxite ore supply problems is a big
cause for concern for downstream calcination factories. "At the
moment, we can ensure supply of the 85% and 86% grades of
calcined bauxite. But it’s true that
it’s difficult to source," a refractory-grade
bauxite producer in China told Fastmarkets, adding that the
availability of higher purity 87% and 88% grades had been
compromised by a lack of raw materials for calcination and a
shift in client demand to lower grades.
In addition, stricter environmental regulations
have been interrupting calcination operations. "Normal
operation was just for a very short period [in 2019]. For the
remainder of the year, we are either upgrading the calcination
kilns or in production suspension when the air quality became
worse and triggered emergency response protocols," a second
Tight supply and weak demand
The combination of mining restrictions, resource
depletion and production shutdowns should have driven the price
of calcined bauxite on an upward course, yet prices slowly
ticked down or stayed flat throughout 2019.
Bauxite prices started 2019 at a relatively low
level, compared with the start of 2018, after a significant
price appreciation during the second half 2017 due to shortages
in China. As it turned out, a weak performance by the steel
sector outside China in 2019 affected demand in most
The price of bauxite, refractory-grade,
85%/2.0/3.15-3.2 (0-6mm), fob Xingang, stood at an average of
$420 per tonne at the start of January in 2019, 8.3% lower than
the average of $455 per tonne at the start of 2018.
The price fell due to sluggish demand from the
refractory sector into the summer months, and subsequently
flattened for most of the third and fourth quarter on slow
Fastmarkets’ assessment for that
grade stood at $385-395 per tonne on January 23, 2020, up
slightly following an appreciation of the yuan against the
The price movement of higher-purity bauxite,
refractory-grade, 86%/2.0/3.15-3.2 (0-6mm), fob Xingang, was
substantially similar to the lower 85% grade. It started 2019
at an average price of $440 per tonne, 7% down from the average
price of $475 at the beginning of 2018.
Fastmarkets’ latest assessment for
that grade was $395-420 per tonne on January 23, also up at the
beginning of the year due to the stronger yuan, as well as the
"The market as we see it has reached a stable
point given the concerns over supply and calcination
processing," a refractories trader in China said, echoing other
views citing broad stability in short-term market
Other sources, however, warned that the supply
disruptions could create supply shocks as and when demand
improved. "On the supply side, some mines in Shanxi are running
out of resources.
Meanwhile, on the calcination side, the
difficulties in sourcing raw materials and increasing energy
costs for natural gas calcination (since calcination with coal
is restricted), would drastically affect the output of the
material," a second refractories trader told Fastmarkets.
A distributor in Europe said that "any pick-up in
demand right now could create short-term supply shocks" and
that would support market prices.