Key aluminum ingredient bauxite is shaping up as China’s newest obsession in its mission to secure raw materials and once again minerals-rich Australia is a major target.
China’s investment in Australia’s mining industry plunged along with the global commodities rout, dropping in 2015 to the lowest since 2008 as surging supplies created gluts of materials including oil and iron ore. It’s a different story unfolding for bauxite, with a potential step up in interest led by Aluminum Corp. of China, known as Chinalco, which confirmed it’s looking at investing in projects in Australia.
Demand in China for the aluminum needed in air conditioning units to airliners will rise by almost a third by 2020, according to Morgan Stanley, while the nation’s supplies of adequate raw materials to produce the metal are dwindling — spurring imports and encouraging new investments overseas in countries including Australia and Guinea.
“In China, the smelting capacity has gone berserk over the last 10 years,” but the nation doesn’t have the economic, long-term supplies of bauxite it requires, said Darryl Pilgrim, Sydney-based industry director for aluminum and alumina at researcher AME Group. China has scope to raise bauxite imports further “and Australia is the logical choice,” he said.
Rio Tinto Group’s $1.9 billion Amrun development on Queensland’s remote Cape York peninsula may prove a key litmus test of interest. The world’s second-biggest miner gave building approval in December, confirming there was “great interest” in sales talks from potential Chinese customers.
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