Chinese bauxite imports at 84Mtpa rate in December

Bauxite
Chinese bauxite imports at 84Mtpa rate in December
Private Client Research
Company Review
28 January 2016
China has released monthly bauxite import data and Ord Minnett makes the
following key observations:
1) December imports surged to 7.1 million tonnes (Mt) or a 84Mt per annum
(Mtpa) rate, up 27% month-on-month (MoM), near the all-time record high
of 8.0Mt;
2) Imports from Malaysia were 3.5Mt at ~41Mtpa (up 33% MoM), with CY15
imports of 24.2Mt (vs 3.3Mt in CY14);
3) Landed costs fell 5% MoM to average US$50/t, down ~16% in CY15.
The Chinese import rate continues to exceed our estimated requirement for the
country of 45–50Mtpa, implying significant inventory build through the month.
Strong import numbers have likely been influenced by bauxite price weakness. The
bauxite market continues to appear saturated at the moment, and has likely
contributed to alumina price weakness, with the spot price remaining just under
US$200 a tonne, down from US$217 a tonne at the start of December.
 Chinese December bauxite imports – Chinese imports of 7.1Mt (84Mtpa rate)
in December was the highest monthly volume in 2015, and is close to the record
8.0Mt in Jan 2014 ahead of the Indonesia export ban. This represents a 27% gain
MoM and up slightly from 6.8Mt in September, highlighting another period of
inventory build. Landed costs fell materially to average ~US$50/t (down ~5%
MoM and ~16% YTD) on the back of weak shipping markets and ample supply.
 Malaysian bauxite supply – At a 41Mtpa rate, this was the second-highest on
record. China imported 3.5Mt of Malaysian bauxite in December (up 37% MoM),
ending CY15 at 24.2Mt (vs 3.3Mt in CY14) relative to Australia at 19.6Mt (vs
15.7Mt in CY14). This equates to a Malaysian run rate of ~41Mtpa, far exceeding
Australia’s ~24Mtpa, and highlights the rapid Malaysian supply response in CY15
to the Indonesian export ban.
 Malaysian mining moratorium – A three-month temporary ban on all bauxite
mining activity in the Malaysian state of Pahang has been effective since
15 January, following environmental concerns. While the proportion of total
bauxite exports impacted is unknown, the state accounts for around 70% of
reserves. At this stage, we regard any interruption to seaborne trade as
temporary, with Chinese stockpiles large enough now to ride through a period of
low import levels.
 Chinese alumina imports – Interestingly Chinese net alumina imports rose to
6.3Mt in Dec (Nov 3.8Mt), with 2015 net imports 4.4Mt (2014 5.2Mt). Some
market observers have forecast the alumina market to enter into deficit in 2016 as
Western producers curtail capacity. However, Chinese output seemingly
continues to grow (Dec data not out yet) despite Alcoa noting around ~70% of
Chinese refiners are underwater at current prices. In our view, a sustained period
of prices at current levels will result in eventual curtailments, with alumina
markets likely to show signs of tightening as we progress through 2016.