SHANGHAI, May 9 (SMM) – Bauxite supplies are tightening in Shanxi province, the main bauxite producing area in north China. Resources with an aluminium/silicon ratio above 4.5 were short in the market, as the Shanxi government clamped down on illegal mining across the province, SMM learned.
The three-month effort began on March 1 to protect ore resources, and has suspended much operation across most bauxite mines, including Jiaokou’s Xishan mine and Taohua mine as well as Xiaoyi’s Yangquanqu mine and Xiaokuang in the Lvliang area. Xiangwang mine remains under partial operation but grades of output are lower than requirements at alumina plants.
Alumina plants are not keen to purchase low-grade bauxite, that accounted for most of the inventories across mines. Mines also require some time to make shipments of bauxite orders with an aluminium/silicon ratio of 4.5-5 that many traders made previously with advance payments. In anticipation of higher prices, sellers also held back from selling cargoes at crushing plants.
Most crushing plants remain under suspension for environmental inspections. Several plants located in mines maintained normal operation while some operated at night. Bauxite ores used by alumina plants undergo processing by crushing plants. A shortage of local crushing capacities will result in higher transportation fees as bauxite ores are transported elsewhere for processing.
The Chinese government requires crushing plants to operate in fully-covered, steel-structured environments to avoid exposing ores to open air. It is costly to construct such an environment and this could further raise processing costs or deter crushing plants from operation.
Bauxite inventories at alumina plants are likely to remain at low levels of 20-30 days of use, as bauxite supplies tighten in Shanxi. As alumina production in Shanxi continues to expand this year, about 1 million mt of capacity will each be added at Xinfa Chemical and Jinzhong Chemicals, and 300,000 mt will be added at Senze Coal Aluminum. This is likely to further exacerbate the shortage of bauxite supplies in Shanxi.
SMM expects bauxite prices in Shanxi to rise another 20 yuan/mt in May following an increase of 40-60 yuan/mt during March-April. SMM also learned that an alumina plant raised its bauxite purchasing prices by 20 yuan/mt this week.
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