SMM analysis: Guinean ore is a key component in China's domestic alumina industry's ore mix

Published: Jan 3, 2024 08:42

Source: SMM

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The fuel depot explosion in Conakry, Guinea, during the week ending December 28th, caused fuel sale restrictions and sparked worries about Guinean bauxite output stability and potential impacts on domestic alumina production. Post-incident, alumina futures surged, with the most-traded alumina contract quickly hitting the ceiling at 3,184 yuan/mt, up 143 yuan/mt or 4.7%, and opening higher at 3,160 yuan/mt in the night session.

Guinea's share of China's bauxite imports has grown lately. From January to November 2023, China imported 91.1035 million mt from Guinea, up 41.74% YoY, making up 70.2% of total bauxite imports, with monthly volumes from Guinea forming 40%-50% of the total. The future impact on Guinea's bauxite output and shipment is uncertain and reliant on government actions, with depot rebuild and fuel supply chain recovery times depending on situation developments.

Guinean ore is significant in China's alumina industry's ore mix. SMM provides data on its usage across China's key production areas and analyzes potential price impact on domestic alumina. See the table below for details.

SMM reports that in November, Shandong led China with 27.78 million mt of alumina operating capacity, 57.8% using Guinean ore. Henan had 7.52 million mt of alumina operating capacity, 34.4% using Guinean ore.

Guizhou's alumina capacities did not use Guinean ore.

Overall, Guinean ore makes up 41.8% of China's operational alumina capacity, highlighting its industry reliance.

The event has raised awareness of Guinean ore supply risks. Assuming a $1/mt price rise, SMM estimated the corresponding average alumina cost increase in Chinese regions, detailed in the table below.

With a $1/mt Guinean ore price rise, Shandong's alumina cost would increase by 12.1 yuan/mt, followed by Henan and Guangxi with 7.2 and 6.8 yuan/mt, respectively.

In general, China's growing dependence on imported ores makes Guinean ore crucial for its alumina industry. The incident has highlighted the influence of global events on ore supplies and alumina production. SMM will keep a close watch on the situation.

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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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