China Bauxite Imports Hit A New Record High in May, While Imports from Mainstream Supply Countries Diverged

SHANGHAI, Jul 13 (SMM) – Customs data showed that China imported 11.97 million mt of bauxite in May, up 7.6% MoM and 31.4% YoY. Imports from Australia were 3.09 million mt, down 0.95% month-on-month, but up 26.6% year-on-year; imports from Guinea were 6.94 million mt, an increase of 19.08% month-on-month and 32.9% year-on-year; imports from Indonesia were 1.74 million mt, a month-on-month decrease of 18.6%, but a year-on-year increase 40.7%; imports from Montenegro, Turkey and Malaysia were 49,400 mt, 124,900 mt and 22,300 mt respectively. 
Imports from Australia showed seasonal decline at the beginning of the year, but picked up in Q2 with the recovery of mining activities. Shipments from Australia are still primarily under long-term orders, and are expected to remain largely stable. There was barely any spot Australian ore that flowed into China in Q2. 
Although Indonesia has not yet put its ore export ban into practice, traders are in a rush to ship both spot bauxite and cargoes under long-term orders to China. At present, the Indonesian mines have basically used up their export quotas, while the bauxite that is still available for sale is mostly held by traders. It may only be a matter of time before Indonesia bans the exports of bauxite, thus Chinese alumina refineries using Indonesian ore should take countermeasures in advance. Since the end of last year, there have been rumours that Indonesia would impose a ban on bauxite exports.  Prior to 2014, Indonesia accounted for about 75% of China’s bauxite imports. In 2014, Indonesia proposed to ban the export of bauxite for the first time and put it into practice in the same year. It was not until 2017 that Indonesia resumed the export of bauxite, and since then the country had accounted for just about 17% of China’s bauxite imports. Before Guinean bauxite was imported, Indonesian ore was mainly used by alumina refineries in Shandong. Following Indonesia’s export ban, alumina refineries in Shandong gradually replaced Indonesian ore with Guinean and Australian ore, whose supply was more stable. After Indonesia resumed the export of bauxite in 2017, alumina refineries in Shandong only partially resumed their purchases of Indonesian ore. In 2019, there was a wave of technological transformation of alumina production lines in Shanxi and Henan. As Indonesian ore could better blend with domestic ore, the demand for the former has been quite stable since 2019. According to SMM survey, there are many alumina refineries in Shanxi and Henan who mix Indonesian ore with domestic ore. As the existing domestic alumina production lines are mostly applicable to both high-temperature and low-temperature ore, refineries could flexibly choose the type of bauxite, thus the reliance on Indonesian ore has been diminished. Only a few refineries in Henan are fully dependent on Indonesian ore. Since Indonesia proposed a ban on bauxite exports at the end of last year, Chinese alumina refineries who use Indonesian ore have begun to actively look for alternatives from other countries, such as Guinea and Malaysia. However, it takes time and technology for Chinese alumina refineries to adapt to blending domestic bauxite with Australian or Guinean ore instead of Indonesian ore. In addition, it costs more and takes a longer time to ship bauxite from Australia or Guinea than from Indonesia.
Imports from Guinea hit a new record high as the newly commissioned alumina projects, such as Bosai Wanzhou and Hebei Wenfeng, use Guinean ore. However, the current regime in Guinea is unstable, and the military government has once again expressed its emphasis on the development of local alumina refineries and plans to set a reference price for bauxite. The ore mining and transportation in Guinea by Chinese leading companies, such as Chinalco and Weiqiao Group, has been little affected for now. However, in the long run, Guinea may impose restrictions on the export of bauxite. 
With the total imports frequently refreshing new highs, China's dependence on imported bauxite has continued to deepen. Indonesia has repeatedly proposed a ban on ore exports, and the export from Guinea also faces uncertainty due to the unstable regime in the country. The supply of domestic bauxite has hardly increased. Increasing demand from Chinese alumina refineries will boost prices of imported bauxite. In the future, the gap of different alumina refineries in terms of bargaining power, cost control, production and operations will be further widened. Alumina refineries with stable ore supply can still maintain current production, while those in Shanxi, Henan and Guizhou, who did not sign long-term orders and are far from the ports, will face growing bauxite costs.