Domestic Bauxite Prices under Pressure as Alumina Prices Plummeted

SHANGHAI, Dec 15 (SMM) - As of December 13, the bauxite prices with an alumina to silica ratio of 5.0 and an alumina content of 58% in Jinbei county of Shanxi stood at 400-450 yuan/mt (including value-added tax (VAT), excluding resource tax) on a delivery to factory basis. And the bauxite prices in Xiaoyi city of Shanxi stood at 430-475 yuan/mt, down 14 yuan/mt on the month. The bauxite prices with an alumina to silica ratio of 5.0 and an alumina content of 58% in Sanmenxia city of Henan stood at 450-490 yuan/mt (including VAT, excluding resource tax, delivered to factory), a drop of nearly 20 yuan/mt. The prices with an alumina to silica ratio of 5.5 in Guizhou stood at 355-370 yuan/mt (excluding tax), flat at the previous month. The prices in Guangxi, with an alumina to silica ratio of 5.5 and an alumina content of 55% stabilised at around 315-330 yuan/mt, flat at the previous month.

The current SMM weighted index for alumina plummeted by nearly 1,200 yuan/mt compared to the beginning of November, rolling back three months of gains. The prices have fallen rapidly and seem not to stop, eroding the profits at alumina plants significantly. The acceptance of domestic high-priced bauxite has been low. Many plants that stood at the breakeven point have continued to push for lower purchase prices of domestic bauxite. The volume of bauxite mined in north China has increased since the beginning of November. Meanwhile, the mining companies offered discounts in a bid to lower inventory and increase cash flows. The bauxite prices in north China have entered a downward track. The bauxite prices are expected to fall if the alumina prices dip further.

The bauxite prices in south-west China stabilised amid a tight balance between the supply and demand. The alumina prices collapsed in the north, while the alumina prices in the south-west fell slower and less due to subdued trades. But as the alumina prices in the south-west will decline, many plants have planned to lower the procurement prices of bauxite.

The bauxite prices are likely to fall with the alumina prices. With the high bauxite inventory and poor profits at alumina plants, they have a strong negotiation power over pricing. It is expected that there will be a decline of 15 yuan/mt in the bauxite prices in the north and a drop of 20 yuan/mt in the south-west.