SHANGHAI, May 30 (SMM) - As of May 26, the BDI index reached 2,933, albeit down 13 points compared with 3,369 last week, it recorded a gain of 6 points from the same period last year. The shipping index was relatively high recently, and the ocean freight could hardly fall, and some traders reported great difficulties in booking ships.
For China’s bauxite imports, the shipment cost continued to climb, which will be gradually transferred to the domestic alumina refineries that purchase imported bauxite. For alumina refineries in Shanxi and Henan, they face the dilemma of insufficient ore supplies in China as well as constantly rising cost of overseas ores. In this case, how will the prices of imported bauxite move in the future?
Looking back to the shipping market, the current war between Russia and Ukraine is still unclear, while countries maintain high demand for commodities and other raw materials, hence the ship transport capacity is relatively tight. Coupled with the seasonal high in the second half of the year, ocean freight is expected to remain high in the short term.
In addition, the current ship transportation mostly undertakes coal, grain, iron ore, etc., and the demand for Panama ship is very strong, hence some traders who cannot find large ships can only seek supramax vessels, resulting in rising freight rates of different types of ships to varying degrees. At present, the freight rate for capesize vessels from Indonesia to China is around US$16-17/mt, while the freight rate for capesize vessels from Guinea is around US$37-38/mt, and that for Panamax vessels from Australia is around US$25-26/mt.
In terms of imported bauxite prices, along with the rise in ocean freight, the prices of mainstream imported ore have been rising. At present, the supply of overseas ores is mostly based on previously signed long-term orders with few spots available for retail sale.
Apart from refineries in Shanxi and Henan that have to purchase imported bauxite in light of the meager supply of domestic ore to ensure production outside, Guizhou has also experienced ore supply shortage due to strict safety inspections since February, and some local manufacturers can only purchase imported ore at high prices to mix with domestic ores in order to barely maintain their production. In addition, Indonesia once again reiterated the ban on mining, and some mines have limited quotas and ship mainly for previously signed long-term orders, with few available for sale in the market, which greatly pushed up the prices.
To sum up, the current profits of imported bauxite is constantly squeezed by high shipping costs, and domestic alumina refineries are pushed away by high imported ore prices, but traders do not lower their prices either. Due to the insufficient supply of domestic ore, some alumina refineries that fail to sign long-term orders for imported bauxite have no choices but to reduce the production or purchase high-priced imported ore.
In the future, domestic alumina refineries may gradually re-locate from in-land areas with poor domestic ore supply to the port areas in order to reduce the transport cost of imported ore.
