Volumes: Highest ever tonnage imported at 7.59 Mt in September. China's demand now exceeds 60 million tonnes per year and is growing as concerns about Indonesian supply increase. We believe this "panic" is exaggerated and should moderate soon - Indonesia cannot stop bauxite exports - it needs the tax revenues from the Indonesian export tax which is scheduled to increase from 20% to 50% in January 2014. Tonnage increases mainly came from Indonesia (some poor bauxite at present) and Rio-Weipa bauxite as the Indian and "other" sources of bauxite dried up (as predicted).
Note that Chinese production of primary aluminium just keeps growing and growing - this revolution will not stop soon.
Prices CIF: Very strong average price in USD for Australian and Indonesian and Indian bauxite but the lower tonnages of the more expensive "other" bauxite reduced the overall average price back to the trendline. Note the "sky-jump" trajectory of the price in AUD terms extending above A$60/t as predicted. This is the same pattern as in the past. When the global economy grows and China grows, the FX rate weakens and the USD price strengthens, leading to a very high AUD price because of the double-positive impacts. This FX effect was less in September as predicted but when the USD strengthens again, the AUD price will go off-scale again.
Market Dynamics
Rio has a good future in bauxite exports and we have predicted they will reach 30Mt pa of mono-hydrate, boehmite-rich bauxite into Chinese high-temperature alumina refineries worth more than A$2 billion pa. Rio and some pundits call bauxite "the new iron-ore".
However, the supply of tri-hydrate gibbsite bauxite to low-temperature alumina refiners and to sweetener circuits in Hi-temp refineries will become the tightest bauxite market as Indonesian supply of this material reduces and as Indian bauxite exports fall away due to India's domestic needs. ABx is focused on supply of gibbsite bauxite for blending into the low-temperature refineries and into sweetener circuits. We plan to commence shipments from our first two mines in Tasmania in December 2014 and we expect a Mining Lease approval before year-end. We are down to the short-strokes now.
Comment
Some of the positive patterns may be attributable to Chinese stockpiling of bauxite in advance of the increase in Indonesian export taxes from 20% to 50% commencing in 2014. The patterns prior to May 2012 when Indonesia applied the 20% export tax is a guideline and prices rose by 22% after May 2012 and China began sourcing bauxite from other countries. We predict that this "panic" buying by China and fear of shortfalls from Indonesia is overdone - Indonesia needs the income and should continue shipping bauxite during 2015 - but the 30% hike in export tax rates from Indonesia will be imposed.
This suggests a strong outlook for seaborne bauxite trade from countries that may substitute for Indonesian supply, especially in 2014-15. This has been ABx's business plan since inception on 24 December 2009.
ABX Price at posting:
15.0¢ Sentiment: ST Buy Disclosure: Held
