Ocean freight rates rebound while imported bauxite indicative prices decline; market trading stabilizes [SMM Bauxite Weekly Review]

SMM, November 5:

Domestic bauxite:

Bauxite prices edge up in some regions; domestic ore market overall stable

Domestic ore supply remains tight, with Shanxi bauxite prices raised slightly. No notable price fluctuations have been reported for domestic ore in other regions, with overall stability expected in the near term around current price levels. As of today, Shanxi bauxite with an Al/Si ratio of 5.0 and 60% alumina content, ex-VAT, ex-warehouse at crushing plants, traded at approximately 540-560 yuan/mt. Henan bauxite with an Al/Si ratio of 5.0 and 60% alumina content, ex-VAT, ex-warehouse at crushing plants, traded at around 500-540 yuan/mt. Guiyang bauxite with an Al/Si ratio of 6.0 and 60% alumina content, VAT-inclusive ex-works price, stood at 510-560 yuan/mt, up 20 yuan/mt from the previous period. Guangxi bauxite with an Al/Si ratio of 6.0 and 53% alumina content, ex-VAT, ex-warehouse at crushing plants, traded at 320-335 yuan/mt. Overall, domestic ore prices have upward momentum, but alumina profitability remains mediocre, and prices are expected to see a tug-of-war. Attention should be paid to supply recovery at mines in major producing areas and changes in downstream procurement.

Imported bauxite:

Guinea-to-China ocean freight rates raised; imported bauxite indicative prices edge down; market transactions stabilize

According to data from October 30, weekly bauxite port departures from main ports in Guinea totaled 3.917 million mt, up 561,000 mt from the previous week, with shipments rebounding slightly. As of now, major Guinea-to-China long-term contract prices for November are quoted at around $72/mt, with base ocean freight rates down $6-7, dragging market prices lower. For Australia, as of October 30, weekly bauxite port departures from main Australian ports totaled 1.226 million mt, down 79,000 mt from the previous week, with shipments basically stable. Attention should be paid to shipment pace at Australian mines and changes in port departures. As of October 30, China's bauxite port arrivals totaled 4.581 million mt, down 570,000 mt from the previous week. Continued attention is needed on the impact of high and fluctuating oil prices and ocean freight rates on forward arrival pace and landed costs.

In terms of prices, the sharp decline in ocean freight rates has led alumina refineries to continuously lower their ore price expectations. However, with ore costs remaining high, upstream mines have not significantly lowered their price expectations. The market tug-of-war is expected to persist, though the overall center of the tug-of-war has edged down slightly. November Guinea long-term contract prices showed declines compared with October quotes, with lower ocean freight rates accounting for a large share, reflecting the growing importance of ocean freight in the cost structure of the imported bauxite market. Meanwhile, no news has emerged regarding 2027 annual long-term contracts due to unstable ocean freight rates. At the same time, rumors about Guinea bauxite export-related policies have circulated in the market, but no official clarification has been issued as of now, and more news in November is needed for further judgment. Meanwhile, alumina refineries maintained bauxite days of inventories at around 94 days, and high inventory levels continued to exert some top-side pressure on ore prices. For Guinean bauxite, the C3 ocean freight rate showed a rebound trend, with Guinea-China freight overall rising back to the $35-38/mt range, putting some pressure on ore prices. However, as freight capacity prices fell to the $30-35/mt range during October, some market players signed Q4 freight capacity long-term contracts, and a short-term recovery in shipments is expected in November. During periods of sharp freight fluctuations, the market became more cautious in bauxite trading, but imported bauxite still changed hands at northern ports within the $71-72/mt price range. As of this Thursday, Guinean bauxite FOB quotes stood at $33-43/mt, with the average price down $2/mt from the previous period; Guinean bauxite CIF prices were reported at $70-72/mt, with the average price down $0.25/mt from the previous period; the SMM imported bauxite index price was reported at $71.68/mt, down $0.55/mt from the previous period. Going forward, bauxite prices will still depend on cost conditions at individual mines, freight capacity conditions, and the impact of the Guinean government's bauxite export quota policy on overall shipments. SMM will continue to closely monitor bauxite market trends and transaction conditions.

Overall, bauxite prices are expected to see intense bargaining between buyers and sellers in the short term. On one hand, domestic alumina refineries hold relatively ample raw material inventories, and their profitability is mediocre, limiting their tolerance for sharp increases in raw material prices. On the other hand, uncertainty over Guinea's quota policy, rising ocean freight rates, and insufficient freight capacity also provide some support to bauxite costs. Going forward, close attention should be paid to the implementation of Guinea's quota policy, freight capacity conditions, and ocean freight rate trends.