Bauxite
The aluminium industry is no longer as integrated as it used to be – pricing power is shifting upstream to alumina and bauxite producers.
Aluminium demand, however, drives alumina and bauxite growth – medium to long term demand is still strong, especially in key sectors.
METAL USAGE IS LINKED TO ECONOMIC DEVELOPMENT
- Iron ore and copper usage maturing following rapid industrialisation in China and other emerging markets
- Aluminium demand in China is still in its early stages with saturation not expected to match current levels of steel or copper for 30 years
- As an economy matures, requirements shift from building and infrastructure development to consumer goods, vehicles, transport and infrastructure etc
- The urbanisation of China is forecast to shift toward internal consumption which will benefit demand for aluminium. Chinese policy supports this
CHINA FUNDAMENTALLY CHANGED THE ALUMINA INDUSTRY
- China’s aluminium production up 400% in last 15 years
- China began importing significant amounts of alumina to supply rapidly expanding smelting industry
- China’s aluminium industry began to move upstream leading to massive development of alumina refining capacity
- Since 2002, China has developed over 50Mt of alumina refining capacity
- Chinese alumina production was based on two approaches:
• Development of merchant refining capacity in Shangdong based on imported Indonesian bauxite
• Processing of domestic ore - New refining capacity has lead to record increase in bauxite demand and imports
- Declining quality of domestic bauxite in China and diminishing global reserves of high quality ore
• Impetus for refiners and smelters to secure a long term supply of ore