Alumina becomes more popular than bauxite due to Indonesian export ban

Alumina is becoming more popular than bauxite, thanks to the Indonesian export ban.

It has been about half a year since the ban took effect and consequently, the bauxite import levels fell considerably and consecutively since February, and there have been no imports of Indonesian bauxite since April.

However, alumina imports continued to be stronger than the same period of last year.

The comparison between the performance of bauxite and alumina clearly shows that alumina now has a more competitive edge over bauxite in terms of cost and also indicates it is unlikely that the bauxite imports will increase in the short term.

Currently, both China domestically-produced and imported alumina are sold at approximately US$420/t which puts a firm cap on top of the bauxite price. Given that sea freight from more remote areas such as Africa and South America is more than double that from Indonesia and Australia, the highest China landed price of bauxite reached about US$90/t. This means that after adding VAT (Value Added Tax) , the cost could easily be over US$110/t. Therefore, the alumina cost could break US$470/t, assuming 2t bauxite are required to produce 1t alumina.

The 50 dollars gap is only a rough estimation, but it’s seems obvious that importing alumina directly from Australia makes more sense at present. Whilst the strategic importance of raw materials should be considered, we would say the import of bauxite won’t recover until the alumina price increases significantly which is unlikely to happen in the near future.