SHANGHAI, June 28 (SMM) -- During a symposium for Suggestions on Henan Bauxite Resources Strategy held in Henan Province on June 18th, the Director of Henan Province Land and Resources Department said Henan Province will further limit alumina capacity and will shut down a number of non-aluminum producers using bauxite as a major raw material.
Details in the proposal reveal that Henan Province consumed 31.25 million mt of bauxite in 2008, but the theoretical service life of 240 million mt of bauxite is only 7.7 years, pushing the existing bauxite resources into period of increasing risk. In this context, Henan province has to use advanced mining methods and equipment, and ensure the mining recovery rate meets design requirements of mines to avoid waste. In addition, Henan Province should set strict new standards for bauxite mining enterprises to prevent excessive mining and environmental damage.
The Director also said Henan Province is expanding bauxite exploration in an effort to increase reserves. The provincial government will further limit alumina capacity in order to conserve bauxite resources, and will remove preferential policies and supportive measures now enjoyed by key alumina producers with self-efficiency rates for bauxite below 50% and other producers using inefficient technologies. The province will consolidate non-aluminum industries which use bauxite as a major raw material, and will shut down smaller, low-technology, and low added-value non-aluminum producers which not only waste bauxite resources, but are also believed to damage the environment.
SMM believes Henan Province is facing a tightening supply of bauxite and that bauxite prices will rise as resources become scarcer. Although global bauxite resources are not scarce, aluminum producers must be able to control costs to maintain long-term development, given the current state of aluminum overcapacity in China. The lack of steady supply and the loss of cost advantages will directly affect the competitiveness of aluminum producers from Henan Province. In this context, SMM believes China's major provinces which are rich in bauxite resources will take stricter measures to control the exploration of bauxite in the future, and higher resource taxes and the tightening bauxite supply will allow bauxite prices to move higher in the future.
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