Import Trend of Bauxite in China and Its Impact on Dry and Bulk Shipping Market

 It is reported that COSCO will build 16 new castlemax dry bulk vessels at a total price of about $880 million in several shipyards in China. In addition, if all the alternative orders are fulfilled, they will reach 30. The ships will be used to transport bauxite from Guinea to China.

For dry bulk shipping market, what is the status of bauxite, what is the trend of bauxite import in China, and how much influence bauxite will bring to dry bulk shipping market this year. Sindh Maritime Network came one by one.

According to Chinese Customs data, China imported 82.7 million tons of bauxite in 2018, an increase of 20.3% over the previous year.

Among them, imports of goods from Guinea increased by 38.3% to 38.2 million tons. In fact, Guinea has surpassed Australia as China's largest supplier of bauxite since 2017 after large-scale investment in Guinea's mineral and logistics infrastructure by Chinese companies.

As more projects are put into operation, Guinea's bauxite exports will continue to grow in the coming years.

Last year Guinea's bauxite production rose from about 50 million tons in 2017 to about 60 million tons. This year, the country's largest exporter, Bokai Mining Company (SMB), was formed by Hongqiao, China, together with Weili International Group of Singapore, Yantai Port Group and UMS of Guinea. Its export volume is expected to reach 60 million tons this year. Although local strikes may pose a downside risk to production, after a two-week strike last May, the impact on bauxite production ranged from 1 million to 1.2 million tons.

On the other hand, although Australia has retired to become China's second largest exporter of bauxite, its bauxite exports to China also increased substantially last year, up 16.8% to 29.8 million tons from 2017. And Australia's exports are likely to increase further this year, as Rio Tinto's Amrun bauxite mine is expected to produce 22.8 million tons this year and 10 million tons more each year. On December 8 last year, the mine completed the first 80,000 tons of cargo shipment and will gradually replace the depleting East Weipa mine as Australia's main source of bauxite exports.

In 2017, Indonesia eased its ban on mineral exports, which led to a substantial increase in bauxite shipments from Indonesia to China. Indonesia resumed bauxite exports from July 2017. By 2018, Indonesia's bauxite exports to China had increased nearly six times over the previous year to 7.5 million tons.

Last year, production cuts at Norsk Hydro refinery in Brazil, strikes at Alcoa in Australia and sanctions imposed by the United States on Russian aluminium made strong demand for alumina and aluminium in the international market and supported imports of bauxite from China.

In 2018, China's alumina exports totaled 1.46 million tons, more than 25 times as much as in 2017. Exports of unprocessed aluminium and aluminium products also surged by 20.9% to 5.8 million tons, although exports per unit fell by 48.6% to 350,000 tons due to trade frictions.

However, international alumina and aluminium prices have fallen since then, which has reduced the export power of Chinese producers to a certain extent.

Norsk Hydro, on the other hand, is expected to resume production in full this year, and the U.S. sanctions on Russian aluminium were lifted in January, both of which are expected to improve the global supply of alumina and aluminium.

Without strong support from overseas demand, China's aluminium production may face greater pressure this year, as it will also face excess domestic supply and weak domestic demand from manufacturing and construction industries.

In response to lower prices, China's aluminium producers agreed in December last year to cut smelting capacity by 800,000 tons a year after closing more than 3.2 million tons of capacity in 2018.

Despite the above disadvantages, the domestic bauxite supply is insufficient due to the exhaustion of domestic resources, deterioration of ore quality and environmental problems. It is expected that this will continue to support China's demand for bauxite imports, which currently account for 45% of the total.