The refractories market has been under pressure since 2019
and the Covid-19 pandemic brought another blow to the market by
slashing industrial activity significantly in 2020.
Global output of crude steel, the major downstream consumer
of refractory products, fell by 6% year-on-year to 873.1
million tonnes in the first six months of 2020, according to
statistics from the World Steel Association.
The falling crude steel output damped demand for
refractories products and their raw materials, with calcined
bauxite initially following the price trend.
But the evolving market dynamics of bauxite have led to an
unusual balance between sluggish demand and tight supply in the
past couple of months. Continued supply issues on the mining
front have held the calcined bauxite market mostly firm, after
a downward adjustment of 6% in June-July from the peak of the
Fastmarkets’ assessment of the price for bauxite, refractory-grade, 85%/2.0/3.15-3.2
(0-6mm), fob Xingang, maintained its year-to-date peak of
$405-415 from March until late May, when the global markets
were pummelled by the Covid-19 pandemic.
This caused the price of the material to drop by 6.1% to
$380-390 per tonne by the start of July. Nevertheless, the
market then stood firm during the second half of July and even
showed indications of an upward adjustment due to the supply
Fastmarkets’ fortnightly assessment for
bauxite, refractory-grade, 85%/2.0/3.15-3.2 (0-6mm), fob
Xingang, was at $380-400 per tonne on August 6, widening upward
by $10 per tonne from $380-390 per tonne in the previous
Environmental restrictions that started in the second half
of 2016 have brought severe disruptions to the supply of
refractory-grade bauxite in the main producing areas across
Stepping into 2020, major mining activities in Shanxi
province were still halted or operating at a minimal level as a
result of continued mining restrictions and environmental
regulations. Sources told Fastmarkets that they viewed the
situation as a near-term new normal for bauxite supply in
In Yangquan city, there was some mining activity, but only
at a restricted level. "We used to have a daily output of
bauxite ore of 3,000 tonnes," one local producer said.
"However, the interruptions to production caused by
environmental regulations on open-cast mining have slashed
output to 300-400 tonnes per day."
At other production hubs in Shanxi province, there were some
underground mining activities in Fangshan county, Lüliang
city (expected to produce around 600 tonnes per day), whereas
Jiexiu city and Xiaoyi city, where the major Xiangwang mine is
located, were under rigid regulations with almost no output
except at some unregistered facilities, according to market
The official restart timeline for operations there was
unknown, market participants told Fastmarkets.
Against the backdrop of tight bauxite ore supply and strict
environmental regulations, a large number of calcination
factories in Shanxi were forced to reduce their output of
calcined bauxite or even put their operations on temporary
"The pressure faced by calcination factories is the
increasing cost of bauxite ore and the weak demand from the
downstream consumer sector," a source at a calcination factory
"Prices of bauxite ore have moved up to 1,400 yuan [$205]
per tonne, about 600-800 yuan per tonne up from that of last
year," he added. "[At the same time,] the price for the
finished product at 88% grade is only 2,350-2600 yuan [per
tonne]. So there is very limited profit for calcination
Evolving market dynamics in the raw bauxite ore sector have
contributed to changes in the material’s supply
pattern this year. Sources have told Fastmarkets that raw
bauxite ore was being shipped from Guizhou and Henan provinces
into Shanxi to be used with locally produced material for
calcination, owing to the supply shortage.
Several market participants agreed that material from the
three provinces can be used for calcined bauxite production,
although the quality of the finished product was unknown. But
others viewed the situation as a short-term development,
considering factors such as land freight costs and the purity
of the ore.
"It’s not sustainable and economical to ship
the material from Guizhou and Henan provinces. I think the
material from Guizhou was shipped during February-May, when
China launched the toll-free policy for highway transport [to
boost trade after Covid-19 pandemic restrictions were ended],
significantly cutting the fee to ship the ore from Guizhou to
Shanxi," a third local producer said.
"Under normal situations, the transport fee would stand at
about 400-500 yuan [per tonne], which is not economical for
calcination factories. In addition, there is the risk of
material quality, including the yield rate for certain grades
of the calcined bauxite," he added.
Material shipped from Henan province has a much lower
freight rate, but there can be the problem of lower purity and
The lower content of aluminium oxide indicate that it would
be harder to calcine the material for high-quality
refractory-grade bauxite. Meanwhile, the lower density of the
material meant that its heat resistance would be affected, the
same producer said.
Industry participants were now asking how much the supply
issue would affect the calcined bauxite market. Although there
was a supply crisis, sources saw the market as balanced as long
as demand remained disrupted by Covid-19.
"The price of the calcined bauxite in the domestic market
has been increasing recently. However, there is still the
pressure for further upward adjustment considering the present
market conditions," a bauxite producer in Shanxi said.
"Demand for certain grades of calcined bauxite was slashed
by around 50%," he added. "We have been hearing numerous
inquiries, yet it’s difficult to have any deals
Another local calcined bauxite producer said that although
there was no output from major mines in Shanxi, the supply
could meet demand considering the current market fundamentals.
Therefore, the price direction was driven by demand issues.
Some other traders forecast the market to be bullish in the
coming months once overseas buyers returned to the market from
their summer holidays, and predicted a new round of upward
This article was first published in the September 2020 issue of Metal Market
Magazine, which carries in-depth feature articles, analyses
and reviews of metal and steel markets.