Alumina and bauxite: Tides are turning - Aluminium...
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Alumina and bauxite: Tides are turning Michael Insulan – Team Leader, Aluminium Raw Materials Tuesday, 10 May 2016
Transcript of Alumina and bauxite: Tides are turning - Aluminium...
Alumina and bauxite:
Tides are turning
Michael Insulan – Team Leader, Aluminium Raw Materials
Tuesday, 10 May 2016
2
An eventful 12 months
Source: CRU
Major events in bauxite and alumina over the past 12 months
185
205
225
245
265
285
305
325
345
30
/04
/20
15
30
/06
/20
15
31
/08
/20
15
31
/10
/20
15
31
/12
/20
15
29
/02
/20
16
30
/04
/20
16
$/t
Wes
tern
Au
stra
lia F
OB
Alumina price index (API)
Atlantic basis price (ABP)
API: high $345/t / low $197/t Malaysian moratorium
Weiqiao enters Guinea
-
2
4
6
8
10
12
Cu
rtai
lme
nts
Res
tart
s
Ch
ange
s in
Ch
ines
e al
um
ina
refi
nin
g ca
pac
ity,
N
ove
mb
er 2
01
5 t
o A
pri
l 20
16
(M
to
nn
es)
Chinese curtailments
3
Alumina Price Index (API) drops to sub-$200/t in January…
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
55
60
65
70
75
80
85
90
95
100
105
30
/04
/20
15
14
/05
/20
15
28
/05
/20
15
11
/06
/20
15
25
/06
/20
15
09
/07
/20
15
23
/07
/20
15
06
/08
/20
15
20
/08
/20
15
03
/09
/20
15
17
/09
/20
15
01
/10
/20
15
15
/10
/20
15
29
/10
/20
15
12
/11
/20
15
26
/11
/20
15
10
/12
/20
15
24
/12
/20
15
07
/01
/20
16
21
/01
/20
16
04
/02
/20
16
18
/02
/20
16
03
/03
/20
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17
/03
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16
31
/03
/20
16
14
/04
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16
28
/04
/20
16
AP
I as
% o
f LM
E 3
-mo
nth
alu
min
ium
pri
ce
Ind
ex o
f al
um
iniu
m a
nd
alu
min
a p
rice
s (3
0/0
4/2
01
5 =
10
0)
API % of LME 3-month aluminium price Alumina price index (API) LME 3-month aluminium price
Past three months
API relative to 3-month aluminium price – 365 days to 28 April 2016
Alumina prices resilient in as aluminium prices plummeted in Q2 2015
Alumina fell to sub-$200/t in January, forcing curtailments in
China and elsewhere
Alumina prices rallied as curtailments took effect and aluminium prices stabilised
Source: CRU
4
…a level not seen since the height of the global financial crisis
0
50
100
150
200
250
300
350
400
450
500
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
01
/01
/20
08
01
/04
/20
08
01
/07
/20
08
01
/10
/20
08
01
/01
/20
09
01
/04
/20
09
01
/07
/20
09
01
/10
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09
01
/01
/20
10
01
/04
/20
10
01
/07
/20
10
01
/10
/20
10
01
/01
/20
11
01
/04
/20
11
01
/07
/20
11
01
/10
/20
11
01
/01
/20
12
01
/04
/20
12
01
/07
/20
12
01
/10
/20
12
01
/01
/20
13
01
/04
/20
13
01
/07
/20
13
01
/10
/20
13
01
/01
/20
14
01
/04
/20
14
01
/07
/20
14
01
/10
/20
14
01
/01
/20
15
01
/04
/20
15
01
/07
/20
15
01
/10
/20
15
01
/01
/20
16
01
/04
/20
16
Alu
min
a p
rice
($
/t W
este
rn A
ust
ralia
FO
B)
LME
3-m
on
th a
lum
iniu
m p
rice
($
/t)
LME 3-month aluminium price Alumina price index (API)
LME 3-month price and Alumina Price Index (API), 1 January 2008 to 28 April 2016
In January 2016, alumina prices fell to levels not seen since the global
financial crisis
Source: CRU
5
Price drop has forced curtailments in China, but almost half of that capacity has now restarted… Curtailments and restarts in Chinese alumina refining industry, November 2015 to April 2016
-10000
-8000
-6000
-4000
-2000
0
2000
4000
November 2015 December 2015 January 2016 February 2016 March 2016 April 2016
Alu
min
a cu
rtai
lme
nts
an
d r
esta
rts
(‘0
00
to
nn
es)
Curtailments Restarts Net impact
Source: CRU
6
…some refining capacity has also curtailed in the Americas
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
North America Central and South America Europe
Alu
min
a p
rod
uct
ion
(M
to
nn
es)
Alumina production by Atlantic region, 2014 to 2016
Source: CRU
2014 2015
2016
2014 2015
2016
2014 2015 2016
7
Pacific increasingly long, Atlantic increasingly short…
-15.00
-10.00
-5.00
-
5.00
10.00
15.00
20.00
2014 2015 2016 2020
Ne
t al
um
ina
bal
ance
(M
to
nn
es)
Atlantic Middle East Pacific
Net alumina balance by major area
Source: CRU
8
Atlantic discount (ABP minus API) is falling – will it move into premium? Atlantic and Pacific alumina prices history – 12 months to 5 May 2016*
*Alumina price index is assessed as Australia FOB (Port of Bunbury) and Atlantic alumina prices are assessed as Brazil FOB (Port of Vila do Conde). The Australia FOB price is referred to as CRU’s Alumina Price Index (API) while our Brazil FOB price is referred to as CRU’s Atlantic Basis Price (ABP). The Atlantic discount/premium is an indicator of the relative market balances in the Atlantic and Pacific areas.
(25)
(20)
(15)
(10)
(5)
-
5
10
15
20
25
180
200
220
240
260
280
300
320
340
30
/04
/20
15
14
/05
/20
15
28
/05
/20
15
11
/06
/20
15
25
/06
/20
15
09
/07
/20
15
23
/07
/20
15
06
/08
/20
15
20
/08
/20
15
03
/09
/20
15
17
/09
/20
15
01
/10
/20
15
15
/10
/20
15
29
/10
/20
15
12
/11
/20
15
26
/11
/20
15
10
/12
/20
15
24
/12
/20
15
07
/01
/20
16
21
/01
/20
16
04
/02
/20
16
18
/02
/20
16
03
/03
/20
16
17
/03
/20
16
31
/03
/20
16
14
/04
/20
16
28
/04
/20
16
Atl
anti
c/P
acif
ic d
iffe
ren
tial
($
/t o
f al
um
ina)
A
tlan
tic
dis
cou
nt
|
A
tlan
tic
pre
miu
m
Alu
min
a p
rice
($
/t)
Atlantic/Pacific differential Alumina price index (API) Atlantic Basis Price (ABP)
Source: CRU
9
Alumina prices will start a slow upward climb this year – ABP forecast to grow faster than API Alumina price forecast to 2020
*Alumina price index is assessed as Australia FOB (Port of Bunbury) and Atlantic alumina prices are assessed as Brazil FOB (Port of Vila do Conde). The Australia FOB price is referred to as CRU’s Alumina Price Index (API) while our Brazil FOB price is referred to as CRU’s Atlantic Basis Price (ABP). The Atlantic discount/premium is an indicator of the relative market balances in the Atlantic and Pacific areas.
(25)
(20)
(15)
(10)
(5)
-
5
10
15
20
25
240
260
280
300
320
340
20
14
20
15
20
16
20
17
20
18
20
19
20
20
Atl
anti
c/P
acif
ic d
iffe
ren
tial
($
/t o
f al
um
ina)
A
tlan
tic
dis
cou
nt
|
A
tlan
tic
pre
miu
m
Alu
min
a p
rice
($
/t)
Atlantic/Pacific differential Alumina price index (API) Atlantic Basis Price (ABP)
Source: CRU
10
Turning to bauxite – China’s reliance first on Indonesia and later on Malaysia has been challenging
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
Jan
-05
Jun
-05
No
v-0
5
Ap
r-0
6
Sep
-06
Feb
-07
Jul-
07
Dec
-07
May
-08
Oct
-08
Mar
-09
Au
g-0
9
Jan
-10
Jun
-10
No
v-1
0
Ap
r-1
1
Sep
-11
Feb
-12
Jul-
12
Dec
-12
May
-13
Oct
-13
Mar
-14
Au
g-1
4
Jan
-15
Jun
-15
No
v-1
5 To
nn
es o
f b
auxi
te (
wet
) im
po
rted
by
Ch
ina
per
m
on
th
Australia India Indonesia Malaysia Guinea Brazil Other
Indonesian unprocessed minerals law passed
Indonesian unprocessed minerals law implemented
Indonesian bauxite export licenses reissued
Malaysian bauxite mining moratorium implemented
Malaysian bauxite mining moratorium extended
New SOP for bauxite mining in Pahang? Chinese bauxite imports, 2005 to 2016 (monthly)
Source: CRU
11
Malaysia: Environmental concerns have escalated – dust problems and water contamination Environmental concerns and popular opposition to bauxite mining in Malaysia
Bauxite mining moratorium: three months from January 15 2016 extended by another three months to 16 July 2016 Moratorium allows stockpile exports in stages: Stage 1: Export of port stockpiles (almost completed) Stage 2: Export of non-port stockpiles, excluding mine-site stockpiles (almost completed) Stage 3: Export of mine-site stockpiles (two licenses issued so far, but trucking has yet to commence) Stage 4: Authorities issue new Standard Operating Procedures (to be announced) Post-moratorium mining likely to be limited to legal operations, with output limited to 1-1.5M tonnes per month. If authorities do not enforce suggested SOP, illegal mining might bring this volume up to 2-3M tonnes per month.
Source: http://fuziahsalleh.my/
Source: CRU
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Weiqiao – China’s biggest bauxite importer – has turned to Guinea
2014 Australia India Indonesia Malaysia
Guinea Brazil Other
2015 Australia India Indonesia Malaysia
Guinea Brazil Other
2016 Australia India Indonesia Malaysia
Guinea Brazil Other
Share of Chinese bauxite imports by origin
Source: CRU
13
Guinea forecast to displace Malaysia over the next five years
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2014 2015 2016 2017 2018 2019 2020
Bau
xite
pro
du
ctio
n (
dry
to
nn
es)
Guinea Malaysia
Bauxite production in Guinea and Malaysia, 2014 to 2020
Source: CRU
14
But there is price risk… Bauxite delivered prices to China, November 2015 to March 2016
40.0
45.0
50.0
55.0
60.0
65.0
70.0
75.0
Nov-15 Dec-15 Jan-16 Feb-16 Mar-16
Ind
ex
(No
vem
be
r 2
01
5=1
00
)
Malaysia Guinea India Australia Brazil
Brazil: $61.3/t
India: $56.5/t
Guinea: $50.3/t
Australia: $44.3/t
Malaysia: $40.7/t
China CIF bauxite price by origin, March 2016
Source: CRU
15
…relating to freight Rotterdam bunker fuel price index and CRU’s composite freight costs index, and Brent crude in $/bbl
30
40
50
60
70
80
90
100
110
120
90.0
140.0
190.0
240.0
290.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Bre
nt
cru
de
($/b
bl)
Ind
ex
(20
16
=10
0)
Brent crude ($/t) Rotterdam bunker (index) Composite freight index
Freight costs at their lowest in 2016?
Source: CRU
16
Changing tides for bauxite and alumina Trending flows of bauxite and alumina
Bauxite going east
Alumina going west
Bauxite trends
1. Risks remain in
terms of
Indonesian and
Malaysian
supply
2. Sourcing from
Atlantic raises
freight cost risks
Alumina trends
1. Atlantic
discount
narrowing
2. Chinese
restarts limit
upside price
potential
Source: CRU
17
CRU’s Bauxite Price Index for Gibbsite (BPI-G) Value adjusted versus weighted average bauxite price assessments
Source: CRU
45.0
50.0
55.0
60.0
65.0
70.0
75.0
80.0
85.0
Ba
ux
ite
pri
ce
on
Ch
ina
CF
R b
as
is (
$/t
)
CRU BAMon BPI-G weekly
Indonesian unprocessed minerals export ban
Malaysian monsoon season
First Malaysian shipments (limited pricing power)
Temporary cutback in Malaysian exports, increased
Atlantic imports
Growing alumina inventories in China, lower alumina prices
Gove starts shipping
Rising alumina prices
First shipments of Guinean bauxite arrive in China
Malaysian bauxite moratorium and
increasing number of Atlantic shipments
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Michael Insulán Team Leader – Aluminium Raw Materials +44-(0)207 903 2123 [email protected]
Source: CRU
