Commodities Comment-Bauxite and alumina: Pressures, but not constraints

China’s import figures for bauxite and alumina illustrate that the domestic market looks to be reacting to the anticipated shortfall of raw materials post the Indonesian export ban. While bauxite import continues to accelerate on a monthly basis as alternate suppliers are sourced, imports of alumina are slowing down despite a favourable arbitrage. In today’s report, we analyse the potentials for further price appreciation for alumina and bauxite, plus what may happen in the medium-long term.

    While we believe there is a cost push story, we fall on the side of backing Chinese domestic mine production to prevent medium-term raw material constraints in the aluminium chain. History has shown that underestimating the elasticity of Chinese supply to rising price in any mined commodity has been a poor trade. With new Chinese alumina refineries continuing to be built in inland provinces where imported bauxite use is unviable, the Chinese industry also seems to share this view.