Shipping delays to rock bauxite, fused alumina supplies, sources warn

By Davide Ghilotti
Published: Friday, 07 February 2020

Participants active in the bauxite and fused alumina markets expect short-term supply shortages to affect consuming destinations in areas including Europe, while sellers take stock of the shipping disruptions arising from measures taken to contain the coronavirus outbreak in China.

Market prices for refractory grade bauxite, and for brown fused (BFA) and white fused alumina (WFA), have mostly remained stable in the two weeks to Friday February 7, while Chinese operations have remained closed, although several sources have pointed to shipping delays as a bullish factor for prices in the near future.

Production operations in China’s Shanxi and Henan provinces have been closed during the past week, and were expected to stay shut until February 17, local sources said.

This was intended to minimize travel between the various parts of the East Asian country and contain the spread of the viral infection, which has so far affected more than 30,000 people in China alone. The closures started at the end of January, concurrent with the Chinese new year holiday, but have now been extended twice.

Participants were factoring-in delays beyond the second half of this month, however. According to fused alumina producers in Henan in contact with Fastmarkets, workers who travel back into the province from outside will not be allowed to return to work immediately, but only after two weeks of self-imposed quarantine – during which they will have their bodily temperature checked on a daily basis.

What this means is that, even if operations could in theory restart in 10 days’ time, the workforce may not be able to run the plants for an additional two weeks.

"If you consider that, it’ll be the end of February before plants start running again," a distributor said. "And that is only if no other issues arise."

A trader added: "All the February shipments are delayed to March. And the new production won’t be arriving in Europe before the end of April at the earliest. Some people will be short [of material]."

Prices muted, warning signs ahead

At the time of writing, most market prices have yet to show a meaningful reaction to the new supply uncertainty.

Fastmarkets saw little change in prices for bauxite and fused alumina over the past fortnight. Prices for two grades of bauxite ticked up slightly, but BFA and WFA were mainly stable.

The prices below were all assessed on Thursday February 6.

The price assessment for bauxite, refractory-grade, 86%/2.0/3.15-3.2 (0-6mm), fob Xingang, was $400-420 per tonne, compared with $395-420 per tonne previously.

Likewise, the price assessment for bauxite, refractory-grade, 88%/2.0/3.15-3.2 (0-6mm), fob Xingang, was $440-450 per tonne, widening upward by $5 per tonne.

The prices of two intermediary purity grades remained meanwhile flat.

Fastmarkets assessed the price of bauxite, refractory-grade, 85%/2.0/3.15-3.2 (0-6mm), fob Xingang, at $385-395 per tonne, unchanged since the previous assessment.

And the price of bauxite, refractory-grade, 87%/2.0/3.15-3.2 (0-6mm), fob Xingang, was similarly unchanged at $420-440 per tonne.

Confirmed business pushed the top end of the 88% range upward, and the low end of the 86% range, while the majority of other data points were in line with existing levels.

Fastmarkets received reports of some small lots sold at prices that were significantly higher than the published ranges. It understands that immediate delivery and small volumes were some of the reasons behind the high premiums, but the repeatability of these trades was not clear.

Fastmarkets assessed the price of alumina, fused brown, min 95% Al2O3, refractory sized (0-6mm), fob China, at $720-730 per tonne, unchanged from two weeks earlier.

The price of alumina, fused brown, min 95% Al2O3, FEPA F8-220 grit, fob China, was assessed at $800-820 per tonne, compared with $810-820 previously.

And Fastmarkets’ latest assessment of the price for alumina, fused white, 25kg bags, cif Europe, was unchanged at €670-770 ($736-846) per tonne.

At the same time, sources said that the short-term outlook could prove bullish. "Prices didn’t move because everyone in China is still at home," a trader said. "Once they get back to work, it’ll start to happen."

One leading concern was that late shipments and disruptions to new production would create a shortage, at a time when consumers were destocking and relying on just-in-time deliveries.

Buyers in Europe had been trying to run down their inventories for the past several months, dogged by weak performances by the refractories and steel sectors. Very few of them maintained inventory beyond a working level.

Distributors and traders did the same, with one saying: "No one has high stocks in Europe right now. It isn’t feasible with such uncertain market conditions."

And another warned: "For those who need material in March and April, it could be tough."

More like this