LONDON (Reuters) – Chinese alumina prices have jumped to a five-month high on news that at least two refineries in the province of Shanxi are being shut down pending environmental inspections.
So far the market impact seems localised. Shanghai aluminium prices have risen on concerns about the potential knock-on effect on metal production in China. Alumina is the intermediate product derived from bauxite used to smelt aluminium.
But the price of alumina traded on the CME is unmoved, reflecting expectations that the giant Alunorte alumina refinery in Brazil is poised to receive official sign-off to return to full production after more than a year of operating at half capacity.
What links both the Alunorte outage and the latest events in China is aluminium’s dirty secret. The metal touted for its environmental benefits, particularly in the manufacture of lighter cars and trucks, has a big problem with storing its toxic by-products.
With the world’s focus on tailings dams after the Brumadinho iron ore disaster in Brazil, aluminium has just received another reminder that it, too, has a tailings problem. Most of the world’s refineries use the Bayer process to extract alumina from bauxite.
The waste product is red mud, a mix of un-dissolved alumina, iron oxide, silicon oxide, titanium oxide and multiple other metals in smaller quantities. It’s the iron oxide that gives the residue its distinctive red colour.