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China's bauxite concerns prevail despite Indonesian deliveries

By Mok Yuen Cheng in Singapore

October 4, 2012 - China's bauxite supply concerns prevail despite a pickup in shipments from Indonesia recently, importing refiners said Tuesday, citing lower than expected volumes in the cargoes received.

"Our cargo just arrived this month, and it's a lot less than expected, by more than 60%," a source from Shandong refiner Nanshan Donghai said. The company previously received monthly shipments of around 200,000 mt.

Another Shandong refiner, Lubei Enterprise, who received a shipment from Indonesia in early September, said he also saw a lower quantity delivered, but declined to provide further details.

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A third Shandong refiner, Chiping Xinfa, said they had yet to receive a shipment from Indonesia, but were expecting the cargo to arrive in October. “We have also been told the amount will be less than normal, but we can’t be sure by how much until we see the cargo,” a source said.

Chinese importing refiners attributed the lower quantity to export quota issues in Indonesia, which limited the amount suppliers could deliver.

The refiners said deliveries from Indonesia were expected to continue regularly in the coming months, but there was no assurance on the quantity, so whether there can be sufficient supply remained a major concern. (see related graph: China Bauxite Imports)

In a bid to ensure regular supply of bauxite from Indonesia, some Chinese refiners such as Aluminium Corp of China (Chalco) and Chongqing Bosai Minerals Group have agreed to investment projects in the Southeast Asian country.

Chalco said in August it will set up a joint venture with PT Indonusa Dwitama to build a bauxite mine and alumina refinery in Indonesia, while Chongqing Bosai Minerals Group planned to invest $1 billion in Indonesia to build a 2 million mt/year alumina plant.

The decision to invest in Indonesia has helped Chalco and Bosai bypass Indonesia's new export policies this year, which had resulted in delays of bauxite shipments to China since May.

The two companies were the earliest to see bauxite shipments from Indonesia resume in July and August, while most others started receiving shipments in September.

"That's the criteria set by Indonesia, so we need to invest to ensure a steady supply of bauxite," a Bosai source said, adding that they saw two cargoes arrive in August and had no issues with the quantity.

Other importing refiners, meanwhile, have been looking for alternative suppliers, such as buying more from Australia and India, or investing in other countries with bauxite resources.

Shandong refiner, Chiping Xinfa, invested in a Fiji bauxite mine in 2011 and has started receiving supply from there since July this year. Others said they were now trying to buy more from Australia and India. But supply concerns also prevail in India recently with talks that the country may move to control bauxite exports similar to that seen from Indonesia.

Market talk is that India may have to cut bauxite exports to support a domestic industry suffering from bauxite shortages.

Indian alumina producer Vedanta said it planned to shut down its 1 million mt/year alumina refinery in the state of Orissa on December 5 due to a lack of bauxite feed.

Chinese importing sources have also noted "difficulties" in getting Indian bauxite supply recently.

"There's definitely been some pressure from India recently, a lot of talk that they are limiting exports, and it seems to be getting more difficult to get stocks from there now," the Nanshan Donghai source said.

"We heard that even those Chinese companies with joint-venture ties in India are having a tough time, facing low bauxite output and reduced export quantity," a Chinese trader said.

In India, an industry source said Vedanta's plan to shut down its refinery "is a move to pressure the government to limit bauxite exports ... we don't think they will really shut down in the end."

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