Bauxite Market Surplus to Widen Further as Malaysia Lifts Export Suspension

KEY MESSAGES

BAUXITE

1. Malaysia to lift bauxite export suspension. Effective April 1st, the government of Malaysia will allow the export of bauxite from the eastern state of Pahang. Bauxite exports were suspended in January 2016 on environmental concerns.

2. Malaysian exports could significantly increase the world’s supply of bauxite. Malaysia was the largest bauxite supplier to China before the export suspension, shipping 24.2 million mton in 2015, which represented 43% of China's total bauxite imports. The lifting of the export suspension has the potential to significantly increase the world’s supply of bauxite.

3. Expecting a world market surplus and downward pressure on bauxite prices. HARBOR expects the world bauxite market to be well supplied in the 2019-2022 period with an average annual surplus of 18.5 million mton, mostly amid growing production in Guinea and Australia.

4. Indeed, Chinese inventories of imported bauxite have increased to record-highs, domestic prices have started to decline. HARBOR estimates Chinese inventories of imported bauxite are today around 49 million mton, a record-high, and enough to cover 6.8 months of consumption (historical average). In this context, prices for imported bauxite have remained mostly stable inside the $45-$60 per mton range, while domestic bauxite prices are now slowly trending down (down 4% since December).

ALUMINA

1. We continue to expect average alumina spot prices of $362 per mton in 2019. Spot prices could fall as low as $250 per mton at some point in the next 12 months assuming Alunorte fully restarts. The full restart of Alunorte's idled capacity will have the effect of switching the world's alumina market from a deficit of 0.2 million in 2018 to a surplus of 2.3 million mton in 2019, depending on the exact timing of the refinery restart. Meanwhile, the lifting of US Sanctions against UC Rusal has removed another alumina supply risk.