Opinion

Three reasons why bauxite seaborne trade is set to grow sharply over the next decade

Carl Firman

Principal Analyst, EMEARC Aluminium Costs

Carl leads our research into bauxite and alumina.

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The clampdown on illegal bauxite mines as part of China’s tougher environmental regime put the spotlight on the country’s reliance on imported bauxite ore. The new regulations saw a fall in domestic production, with imports increasing by 20% in 2018 to 82 Mt. Volumes will break 100 Mt this year.

The interplay between domestic and imported ore into China will continue to frame the bauxite market. Why do we expect seaborne trade to become increasingly important in the next decade?

1. China’s domestic reserves aren’t enough

The sheer size and scale of demand from Shandong’s alumina plants for imported bauxite, as well as the growing future demand for bauxite from central China, means that domestic reserves and ore quality aren’t enough to meet China’s needs.

2. China already relies on international Bauxite production

Since China entered the bauxite market in the early 2000s, the industry has grown rapidly. With just two importing refineries in 2005, the ready availability of cheap Indonesian bauxite ore helped to boost this to 10 refineries by 2014.

The introduction of Indonesia’s 2009 mining law prohibiting ore exports forced the industry to change course and China had to look elsewhere to support its flourishing coastal refining industry.

Malaysian exports grew sharply in 2015 and 2016 and Guinea exports from 2017 onwards.

3. Environmental concerns prompt China to invest abroad

The growing concern about pollution in China is encouraging Beijing to consider building more refineries abroad. Within the next 10 years, Guinea could have its second alumina refinery, facilitated by a US$20 billion Chinese loan.

China is also set to finance and construct most of the planned new railways in Guinea that will help Chinese companies to export their bauxite at a lower cost.

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Increase in seaborne trade makes pricing more challenging

Bauxite seaborne trade is set to grow sharply over the next decade, which will increase diversity of supply. Bauxite ores differ in quality according to location. An ore that is economical and suits the technical needs of one refinery might be a poor source for another. This makes pricing challenging.

That’s why Wood Makenzie has developed a bauxite price forecast model: the first independent tool of its kind. Want to know how you can accurately forecast bauxite prices out to 2040? Fill in the form on this page to find out more about our model. 

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