Bauxite-related interruptions major challenge for global markets
Official notice of Gladstone restoration unlikely to cap price gains
Indonesian near-term alumina demand growth could outpace supply
This report is part of the S&P Global Commodity Insights’ Metals Trade Review series, where we dig through datasets and digest some of the key trends in
iron ore
,
metallurgical coal
,
copper
, alumina, cobalt,
lithium
, nickel and
steel and scrap
. We also explore what the next few months could bring, from supply and demand shifts to new arbitrages, and to quality spread fluctuations.
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The global alumina market may remain at elevated levels in the fourth quarter of 2024 on the back of the upstream bauxite sector seeing availability issues and other disruptions, which will likely more than offset a limited restoration of reduced output and shipping issues seen in Q2-Q3, market participants said.
“A month ago, I would not have believed that alumina prices would actually be where they are today,” said a producer, echoing sentiments from market participants across the spectrum as alumina prices surged 25% on the month as of Oct. 23.
Platts, part of S&P Global Commodity Insights, assessed the global benchmark alumina price at $687/mt FOB Australia on Oct. 23, surpassing a six-year high that was last seen in October 2018.
The day-on-day price surge of $40/mt on Oct. 11 driven by the latest Guinea bauxite shipment suspension was last topped in September 2021 amid concurrent curtailments at the time at Jamalco, Alumar and Noranda in the Atlantic, in China, alongside the Guinea military coup.
Supply from Guinea, the largest bauxite supplier to China, has been hit by disruptions over the past few months, first due to unfavorable weather conditions and now due to exports being blocked by Guinea’s customs authorities.
The FOB Brazil Atlantic Differential (AD) was at a $27/mt premium Oct. 17, down from a year-to-date peak of $45/mt premium in August as the resumption of Jamalco alumina shipments from the reopened Rocky Point port in Jamaica eased supply bottlenecks in the Atlantic.
Chinese domestic alumina was assessed at Yuan 4,800/mt ($673/mt) ex-works Shanxi Oct. 23, up nearly 50% from the beginning of the year, and at a record-high since Platts began the assessment in 2010.
Bauxite woes grip global markets
China’s alumina spot prices hit an all-time high Oct. 22 on the back of the suspension of GAC’s bauxite exports from Guinea and robust downstream demand, while its dependence on Guinea as the main source of imported bauxite remains high.
Global Trade Analytics Suite (GTAS) data by Commodity Insights showed that China and India were the top two importers of Guinean bauxite in Q2, with 29.4 million mt and 1.24 million mt, respectively.
Spot alumina supply within China remains tight amid persistent bauxite issues related to environmental audits and grade consistency and refinery maintenances, while expectations of fewer hydropower-related smelter curtailments in Yunnan this year as well as smelting capacity restarts and commissioning in Xinjiang, Sichuan and Guizhou regions are spurring further demand for alumina in China.
The closed Chinese import arbitrage window alongside growing exports to Russia further contributes to spot tightness within China.
Gladstone restoration
Market participants continued to seek clarity on the state of matters regarding the force majeure invoked on third-party alumina exports out of Gladstone, with several participants pointing out that the increase in spot liquidity of Gladstone cargoes in late Q3 appeared to suggest a return to normalcy in shipments.
Data from the Gladstone Ports Corporation showed that alumina shipments from the Port of Gladstone stood at 459,851 mt in September, recovering from the year’s low of 327,500 mt in April and just shy of the year-to-date peak of 463,596 mt in January prior to the gas pipeline incident.
Any official notice regarding the potential easing of the force majeure notice is unlikely to ease tight spot supply, as shipments appear to have returned to pre-incident levels.
Cautious optimism over new supply
Markets are keeping a close watch on the 1 million mt/year Mempawah alumina refinery in Indonesia, which was commissioned in September, as a new alumina supply source at a time of multiple supply disruptions on a global scale across 2024.
Mempawah processes bauxite into smelter-grade alumina which is processed into aluminum by PT Indonesia Asahan Aluminium (Inalum), one of the two joint-venture partners in PT BAI with a 60% stake, the other being PT Antam which owns 40%.
However, some buyers are cautiously optimistic over the new supply, citing differences in timelines of commissioning the plant and operating it at a commercial scale.
According to sources familiar with the refinery, alumina output from the plant could be expected to be commissioned in two phases of 500,000 mt each as the refinery ramps up to full capacity over H1 2025, with a trial production period of about six months.
Inalum may continue to procure alumina externally for its smelter in H1 2025 while operations and output stabilize at the new refinery and could become a net alumina seller in the future when the refinery is operating at full capacity before other Indonesian smelter projects come online, sources added.
“We are mindful that global output is still higher year on year and the new refinery online in Indonesia will be contributing to the picture, although we would factor in a steady ramp-up and at this point in any case we are looking at a trial production phase,” said Karen Norton, principal analyst for aluminum at Commodity Insights.
While threats to alumina production and bauxite shipments continue in the absence of new commercial supply, global alumina prices in Q4 are expected to remain significantly above levels seen earlier in the year.