Weakness in the refractories sector as a result of the
global Covid-19 pandemic and related lockdown measures was
weighing on a number of upstream markets.
In the Chinese market for brown fused alumina (BFA),
participants took a bearish short-term outlook after the
majority of kilns were suspended in the coutnry, the
world’s largest producer of BFA, owing to the weak
With the pandemic continuing to sap demand from key
downstream sectors such as steelmaking, prices for refractories
were coming under considerable downward pressure.
Prior to the outbreak of Covid-19, crude steel demand was
expected to reach 1.81 billion tonnes in 2020, according to the
World Steel Association. But the association now forecasts
steel demand to be around 1.65 billion tonnes this year, due to
the effects of pandemic lockdown measures.
The bearish backdrop in such a key end-market has weighed
heavily on the upstream refractories sector. BFA, used in the
manufacturing of refractory products, has therefore also come
under pressure since coronavirus began to quickly spread across
the world in early 2020.
Fastmarkets’ price assessment for alumina, fused brown, min 95% Al2O3, refractory
sized (0-6mm), fob China, has fallen by more than 15% since
April, when price stability from the start of the year was
broken due to Covid-19-related lockdowns restricting demand.
The price was $600-630 per tonne on August 20, down by $110-120
per tonne from $720-740 per tonne on April 2.
Industry participants were lamenting the tough times,
reporting that the operating rate of BFA kilns across China was
only around 20%, with the rest having suspended operations due
to the bearish market conditions. There was also a great deal
of uncertainty about when these kilns would be restarted.
The total operation rate across China was 20.75% in July,
according to market sources. This compared with 41.82% in June.
The BFA kilns in the major Chinese production hubs of Guizhou,
Shanxi and Henan were at 31%, 40% and 11% in July respectively,
the same sources estimated.
Behind the mass closures of BFA plants in China were
evolving market fundamentals characterized by the sharp drop of
BFA market prices against a relatively firm feedstock price for
calcined bauxite. The 15% drop in the price for refractory
grade BFA suggested extremely thin demand from consumers in
both the seaborne and the domestic markets.
On the supply side, sellers were offering material at cost
in an attempt to entice business, while those that were unable
to sustain their operations were forced to implement
suspensions against the unfavorable backdrop. This, in turn,
could drag prices down further should these sellers start to
destock, a China-based producer source said.
"The price for certain grades of brown fused alumina could
go down further, by around 50-100 yuan [$7-15 per tonne],
despite the firm costs, due to inventory destocking," a second
fused alumina producer in China told Fastmarkets. "We heard
that some factories in Yichuan county and Luoyang city might
have closed for good, for several reasons."
At the same time, supply of calcined bauxite in China has
been hampered by local environmental and mining regulations,
disrupting mining activities and calcination processes.
Resource depletion was a further hurdle to the sourcing of
high-grade calcined bauxite used for producing BFA.
Prices for white fused alumina (WFA) and BFA previously
moved in tandem, based on common effects arising from the
fundamentals of both markets. But diverging elements have been
at work since last year, resulting in a breakdown of this trend
and the development of independent price patterns for BFA and
So far in 2020, the two markets have become increasingly
independent of one another, with WFA having deepened its price
discount to BFA against a historic premium.
Fastmarkets’ latest assessment price assessment
for alumina, fused brown, min 95% Al2O3, refractory sized
(0-6mm), fob China, was $600-630 per tonne on August 20, while
quotes for WFA were heard as low as $550 per tonne fob China,
meaning the discount has increased to $50-80 per tonne from
around $30 per tonne in May.
Fastmarkets assessed the price for alumina, fused white, 25kg bags, cif
Europe, at €525-690 ($621-817) per tonne on August 20,
widening downward by €5 per tonne from €530-690 per
tonne on August 6, amid declines in the feedstock price for
Given the high inventory of WFA and the sluggish demand,
some market participants expected further drops in the price.
Lower WFA prices were expected to add further pressure to those
for BFA, given that the former can replace the latter in
certain applications because of its higher alumina content,
ensuring higher heat-resistance and anti-erosion properties in
While some industry participants maintained that BFA prices
have bottomed out due to being close to or under some
producers’ costs, others expected further declines
given the bout of destocking taking place amid the widespread
"We have kept the price unchanged because it’s
bottoming out. But it might go down further in the near term
amid the weak market," a third producer source told
"The market might stay relatively quiet in the coming
month," he added. "But we are still waiting to see whether the
environmental regulations will be as rigid as those of last
year, which might support the BFA market."
But demand remained a major issue for the market,
"There are environmental inspections in Henan now, which
would not affect production given that the majority of plants
have been shut," another producer source in China said.
"Without demand improving, the environmental regulations will
have a limited effect on supply."
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.