Restart of China’s bauxite, fused alumina production uncertain amid virus outbreak

By Davide Ghilotti, Sybil Pan
Published: Friday, 14 February 2020

A recovery of China’s bauxite and fused alumina production remained uncertain in the major production hubs of Henan and Shanxi provinces due to the coronavirus outbreak, creating concern about supply and delivery of the refractory material in the short term.

At the time of writing on Friday February 14, a number of production companies in both provinces were either closed or operating only at a minimum level. Hampered by provincial border closures, a crackdown on logistics and health-related restriction measures taken by local governments, sellers have said that this will lead to lower production and late shipments to seaborne markets.

Authorities in Shanxi province issued a document titled "Opinions on stabilizing labor relations and supporting enterprises to recover operation and production during epidemic prevention" on February 11. Aside from measures to deal with labor relations during this period, it also indicated that production recovery would be based on each company’s specific situation rather than a blanket approval for recovery.

According to a producer of bauxite in Yangquan, in Shanxi province, if a factory is to resume production, at least two conditions must be met, including single-room accommodation for workers and daily health monitoring.

"We have our own industrial park, which is an advantage so that we can provide workers with daily necessities," the producer said. "As for logistics, we have our own trucks and the highway is open, so it is working normally for us now."

But many other producers in Yangquan, Xiaoyi and other cities in Shanxi that cannot meet these conditions have been allowed to restart operations with their applications unheard.

"We have filed our application forms to the government and are waiting for the reply," a bauxite producer in Xiaoyi said.

"It’s unknown when the logistics will be back [to normal]. But except for the expressway, roads through counties have been blocked. Vehicles from outside the area are allowed to enter only if they have a permit issued by the local police station, which might take days to get," a third bauxite producer told Fastmarkets.

"Inventory of certain grades of bauxite is running low since calcination is not allowed at the moment," a bauxite trader said. "We have heard that the price of domestic bauxite for 85% grades is up by 100-150 yuan per tonne to 2,300 yuan [$329] per tonne, while the 86% grade [price has gone up to] 2,400 yuan per tonne."

A trader of bauxite told Fastmarkets that the concern over China’s bauxite supply was because some major producers were effectively closed at the moment.

"Logistics is very patchy all across China. Crossing provincial borders is downright impossible now. If you are anywhere inland, you can’t move material to the ports on the coast," one local producer of bauxite and alumina said.

"We don’t expect to be able to ship anything out of our plant until the first or second week of March," a second producer, with operations in Shanxi, added. "There are no couriers available now. What this means is that no ships are going to be loaded until March 18 at the earliest."

Due to the holiday for the Chinese lunar new year, which was supposed to end on January 30 but was extended to February 10 in most provinces because of the virus outbreak, prices of bauxite assessed by Fastmarkets have remained unchanged from before the holiday.

The latest assessment of the price of bauxite, refractory-grade, 85%/2.0/3.15-3.2 (0-6mm), fob Xingang, was $385-395 per tonne on February 6, unchanged from two weeks earlier.

Fused alumina, Henan

Production of fused alumina in Henan province was severely disrupted over the winter months of 2019 due to an earlier environmental crackdown, especially affecting the production of brown fused alumina (BFA).

At the beginning of 2020, the coronavirus outbreak became another factor to badly affect fused alumina production in the area.

It has been said that production of fused alumina in Zhengzhou and Luoyang would not recover until the end of February. Logistics movements were not permitted until further notice.

"Production has been halted here from last November [due to the environmental shutdown]," a BFA producer in Luoyang told Fastmarkets. "We don’t know when operations will be back to normal. It depends on the virus control… After all, Henan is geographically close to Hubei, where the virus first broke out in December last year."

In another production area, Sanmenxia, production was partially back with a limited number of kilns in operation.

"To be allowed to have workers back at factories, we need to guarantee that they stay within the park and live by themselves," a white fused alumina producer in Sanmenxia said. "Logistics has also recovered partially here, but it takes a lot of effort to get land transport through the blocked areas."

As far as the price of fused alumina is concerned, producers want to keep it stable at the moment because "we don’t know how to adjust it and now we cannot guarantee the supply, given the uncertainty brought about by the outbreak," a fused alumina producer in Luoyang said.

"Before the holiday, we were consuming inventory of BFA due to the environmental crackdown," a trader in fused alumina in Tianjin said. "Now, with the continuing closures, the inventory is getting lower."

Fastmarkets’ latest fortnightly price assessment for alumina, fused brown, min 95% Al2O3, refractory sized (0-6mm), fob China, was unchanged at $720-730 per tonne on February 6.

On the same day, the price of alumina, fused white, 25kg bags, cif Europe, was €670-770 ($728-836) per tonne.


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