Bauxite: Will Australia fill Indonesia’s shoes? – by Oliver Probert (Australian Journal of Mining – May 07, 2014)

Indonesia’s move to ban the export of mineral ores has left analyst Wood Mackenzie asking the question: where will China look to satisfy its growing appetite for bauxite?

The analyst’s most recent forecasts indicate that global alumina refinery production will rise to almost 140mt by 2018, which means we’ll see bauxite demand rise by almost 80mt to 350mt. China is the main global player in the aluminium market. It represents 40% of global supply, and 60% of global demand for the metal.

With China’s alumina refinery production forecast to rise by almost 17mtpa by 2018 and a further 40mt by 2030, Wood Mackenzie estimates the Asian giant will consume as much as 240mt of bauxite by 2030.

Until recently, Indonesia was the main supplier of bauxite to China, accounting for around 65% of overall supply last year. But in an attempt to create jobs by encouraging producers to build refineries on mainland Indonesia, the government enforced a ban on mineral ore exports in January.

The ban has created a significant supply gap for China to fill, and while swollen stockpiles and source diversification will soften the blow in the short to medium term, Wood Mackenzie believes the ban could be transformative to the global bauxite market in the longer term.

“With China’s alumina demand set to increase so sharply, there will be huge implications for bauxite demand,” explained the Wood Mackenzie’s head of metals and mining research Julian Kettle.

“We estimate China will need access to as much as 240mt of bauxite by 2030, and as it only produced 72mt domestically in 2013, huge uncertainty remains over the import versus domestic supply mix.”

If Indonesia sticks to its guns on the export ban in the longer term, China will have to look to alternative import sources or develop new mines domestically.

But Wood Mackenzie says China has in fact been making moves to diversify supply ahead of the ban, which was first mooted in 2009.

China, the analyst thinks, has been looking to multiple alternatives – including Australia – as potential sources for larger volumes of bauxite for some time.

“In recent years we’ve seen China sourcing additional quantities of bauxite from a variety of other countries, most notably Australia and India – and while the alternative sources are not supplying huge volumes to China currently, in time they could do,” said Wood Mackenzie aluminium analyst Carl Firman.

“This is a strategic move by China to ensure it can firstly meet the direct needs of the coastal aluminium refineries it’s built up over the years, but secondly in preparation for the ban coming into force.”

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