Malaysia Bauxite – “We were Wrong”

In 2015, our Managing Director Paul Adkins predicted that by 2018 Malaysia’s bauxite export bonanza will be dead or close to dead.  But we were out by a year – it’s now looking like Malaysia’s bauxite activity will die this year.

Since Indonesia banned its ore exports including bauxite in 2014, Malaysia’s bauxite exports to China started  in 2014 and surged in 2015 with the volume of 24 million tons. Malaysia became to be the largest bauxite supplier to China in 2015.

The large volume of bauxite export caused pollution issues for the local environment. Red dust from bauxite transportation polluted local roads, trees and gardens in Kuantan, the local city through which the trucks rumbled at all hours. In order to protect the local environment, Malaysia banned bauxite mining since early January 2016. They extended the ban by three months in April and again extended the bauxite export ban till the end of 2016 in September. At the end of October, Malaysia’s Natural Resources and Environment Minister said the ban may be extended till 2018. But the original problem was caused by so many illegal mining operations, and the ban succeeded only in punishing the legal companies. Malaysia’s bauxite export to China shrank to 7.7mt in 2016, which was far below the bauxite volumes from Australia and Guinea.

It’s now looking like Indonesia will resume exports of bauxite to China.  Indonesia is a mature bauxite supplier to China, and its reserves are far larger than the reserves in Malaysia.  In any case, Australia, Guinea, Brazil and Ghana have all increased exports to China in the past two years. The likely re-emergence of Indonesia will eventually kill the bauxite industry in Malaysia.

The only advantage Malaysia offers to China is its low price – its ore is poorer quality than Indonesia or Australia.  And if China goes ahead and shuts alumina refining capacity this winter for controlling the air pollution problem, alumina imports will take priority. That will cause even worse situation for bauxite businesses in Malaysia.

Malaysia bauxite will have a difficult time in 2017 and they are really at the edge of the abyss now.

Second Facebook Live Broadcast

Hey folks!

It’s our pleasure to announce we’ll be holding our second Facebook Live Broadcast on Thursday February 16th at 8:00am NY time. The topic for this discussion will be:  “What’s going on in Carbon prices and what does it mean for the international aluminium industry?”

As we’ve seen this past couple of weeks, there have been many changes in the industry and if you add that to the current political and economical scenarios we have a recipe for uncertainty.

The dynamic remains the same:

  • We’ll hold the Facebook Live and leave the video up for 2 weeks, after which it’ll be deleted.
  • After the broadcast we’ll send out a transcript of the broadcast to our clients.
  • If you want to make a comment or ask a question you can, just be aware that everyone will be able to see whatever you comment.
  • If you wish to make a comment or a question but wish to remain anonymous you can send it to and we’ll post it for you.

See you this Thursday!

*We do not own any rights over the featured image

Environmental inspection – Coming again



The Ministry of Environmental Protection (MEP) has proposed measures in a draft policy document aimed at curbing the deteriorating air quality around key cities such as Beijing, Tianjin and the surrounding areas. The draft rule includes a total of 28 cities in Shandong, Henan, Shanxi and Hebei provinces.

Yesterday, it was announced that the first 2017 inspection will officially start 15th February and last for one month. This could be an important litmus test of the new draft rules.  If the inspection team implement the rules mentioned in the draft, we can see coal, alumina, aluminium and carbon industry will all have a major restriction. However, the extent of the impact is dependent on how strict the inspection is!

Since July last year, the first round inspection started in Henan Province.  Almost all carbon producers were seriously affected  or even shut down. In the following months, Shandong, Inner Mongolia, Hubei, Chongqing and Jiangsu all saw inspections and had some factories closed. It’s a good thing that the authorities are acting to improve the air pollution.  The not-so-good outcome caused by the inspection is market disorder – supply shortages pushed mainstream price up hundreds of yuan. High price does not mean high profits or healthy market condition. Manufactures are frightened by endless inspection and endless policy requirements.

To make matters worse for producers and market participants, China’s annual “Liang Hui” – the annual week-long meeting of Parliament – will take place in March.  It’s likely that some measures will be put in place to ensure blue skies during that week.

What we heard from carbon factories is they don’t know what the central and local governments will do in the new round of inspection.  But producers really want to understand and accept if they indeed have the right levels of pollution treatment equipment. Most carbon plants were able to return to full production following last year’s inspections, except in Gongyi where they are still under limitation.  The carbon plants cannot afford to spend capital on new equipment if the government is going to change the rules.  They can’t afford the capital, and they can’t afford to be shut down again.

Hopefully, the inspection teams will bring clarity and consistency to the producers and therefore to the market. Meanwhile, it will be a substantial and effective way to improve air quality.

Outlook for aluminum prices this coming week

Last week was the first week after Spring Festival.  SHFE aluminum’s main contract is supported strongly around ¥13,500 per ton; while the overall LME aluminum price was above the average, and it has a larger bounce than the Shanghai aluminum price.

At present, from the supply side, the output of electrolytic aluminum during Spring Festival was around 700,000 tons according to the capacity of 37 million tons in China. Owing to the holidays of many aluminum bar factories, the direct selling of aluminum liquid drops to around 50%. If so, the output of casting ingots was around 350,000 tons, but there was only 165,000 tons delivered to the spot market, and most of the remainder stayed at smelters and railway stations. At present, there are only about 260 train sets in Xinjiang, and the backlog of ingots are more than 350,000 tons until now. Although the shadow inventory makes a breakthrough of 1.1 million tons, the amount of the truly delivered ingots only maintains at 700,000 tons, the reported inventory does not cause any stress to the supply side.

From the demand side, some large and medium aluminum factories did not have any days off during Spring Festival, meaning they worked through their raw materials without being able to buy replacement material until the market re-opened.  Now they are actively purchasing aluminum ingots. In addition, according to my investigation, most of temporary shut-down small factories said that they would resume production after the 15th of the first month of the lunar calendar (Lantern Festival) after Spring Festival. It is also to say that the aluminum market starts to boost and makes a good deal at the time that people return to work after Spring Festival.

From the macro news side, at the beginning of 2017, there were many proposals and briefings of national-level “electrolytic aluminum  supply-side structural reforms”, “environmental inspection de-capacity”, and large amounts of speculative funds seized this opportunity to hype, leading the aluminum price to rise. While in international markets, the first two copper mines in global scale met with strikes and export sanctions in succession, worrying the short supply of copper market. Copper, as a “weathervane” of non-ferrous metals, whose sharply rising price drove the price of other related metals up, such as the metals represented by aluminum.

In conclusion, although it is the slack season after Spring Festival, a large drop of aluminum prices will not occur, influenced by many factors. In consideration of those factors simmering, the aluminum price will continue strong in the next week. It is anticipated that SHFE aluminum price main contract will be strong at RMB 13,500-14,200 per ton; and LME aluminum price will be USD1,830-1,900 per ton, but does not exclude the possibility of the breakthrough of USD1,900 per ton.

Subscribers to our Weekly Aluminum Alert saw this post first.  If you would like to subscribe, or you want more information, contact Stefi at AZ China,


Up, up and up – anode prices rising rapidly

Anode prices are rising rapidly
Anode prices rising rapidly

The feature chart tells a story that subscribers to our Weekly Carbon Monitor are already across.   Since the start of January, prices have taken off. The lower quality material has risen by 17.5% in 2 months, and that’s on an 8-week moving average basis.

The thing is, anode prices are the last to react.   Here’s the same chart from our Weekly Carbon Monitor for calcined coke.

CPC price rises are causing anode prices to also rise
CPC price rises are causing anode prices to also rise

The lower quality material, the blue line, has risen from RMB1200/t in November to over RMB1600 early February.  And that’s an 8-week moving average.  That’s a 33% increase in the space of 2 months.  It’s no wonder that aluminum companies and carbon companies inside and outside China are responding.

We are hearing multiple reports of panicked reactions and sudden changes in purchase order quantities.   Suppliers around the world are fielding enquiries from people looking for supply of calcined coke or anodes.

The question is, why?

Here’s the same chart from our Weekly Carbon Monitor for anode grade green coke.

Green coke prices are pushing CPC and anode prices
Green coke prices are pushing CPC and anode prices.

Green coke prices have risen by up to 25% on an 8-week moving average basis.  But green coke price is not the whole story, and the difference between the 25% rise in GPC price and 33% rise in CPC gives us a clue.

Calcining plants in China’s north and northeast are struggling to get approval to operate at full capacity.  Several small plants were closed through the last couple of months last year, and that shortage of capacity is now starting to hurt supply of CPC. That in turn is now hurting China’s anode producers.

It’s slightly counterintuitive.  The traditional narrative is that calcining capacity should never be a problem, and that supply of green coke is the most important factor.  But right now, anode grade green coke is available, especially now right after the Chinese New Year break.

This is not just a China problem.   China supplies roughly 20% of the rest of the world’s carbon for aluminum smelters.   Aluminum companies around the world are now marshaling the troops and increasing their watch on what is happening.  Some are also switching supply strategies.

After all, which purchasing manager anywhere in the world wants to be known as the guy who shut the smelter down because he failed to buy enough petcoke/ calcined coke/ anode supplies?

If you are interested in knowing more about our Weekly Carbon Monitor, please contact Stefi at, or complete the attached contact form.



China’s January aluminum production – new record

SMM today published a story reporting production statistics for January 2017.  According to the Shanghai-based company, January’s aluminum production came in at 3.04 million tons.

That’s a record high for China.  On a daily basis, it equates to 98,000t per day.

China's January 2017 aluminum production is reported at record highs
China’s January 2017 aluminum production is reported at record highs

But there’s always a problem with the official numbers that come out of China regarding aluminum production, and this number is no exception.  Why for instance is the daily run rate exactly 98,000t?   Not 97,9999 or 98,001.   And not a decimal point to be seen.  It’s almost as if someone in the CNIA simply took a number and multiplied it by the days in the month. Of course, they would never do that, would they…

And how exactly did they collect the data at the end of the month, when the offices at all 100 smelters in China were closed for Chinese New Year?

One also wonders why January 2017 had the rare phenomenon of having exactly 98,000t per day, when the only other month that achieved that was January 2016, when exactly 80,000t per day was recorded.  Not a decimal point to be seen that month either.

For the record, January 2017 is a 5% increase over December, and a whopping 22.5% increase over January 2016.   But as we have said many times before, it’s dangerous to take a single month’s number on its own in China, and the first quarter of each year is the worst.

There’s no doubt that aluminum production is increasing.  Each week in our Weekly Aluminum Alert, we report more capacity entering.  But we simply cannot use this number with any sort of reliability.   The early number is usually the same as the final number published by the IAI on the 21st of each month, but that doesn’t make it any more accurate.