Six things we learnt at the 2022 bauxite and alumina conference in Miami
Key talking points at Fastmarkets’ bauxite and alumina conference, held in Miami, United States, April 26-28.
Oversupply of alumina
The second quarter of 2022 has so far resulted in more cargoes of alumina coming to the spot market out of Australia for April and May, market participants said, following acute tightness at the start of the year, which drove prices to their highest since 2018.
There was much more supply on a spot basis, a trader said, suggesting that it is likely to “trickle out” rather than all of it becoming available at once.
This situation has been compounded by additional spot volumes arriving on the market after 80%-owner Rio Tinto took on 100% of the capacity and governance at the Queensland Alumina (QAL) refinery in Australia.
This followed an announcement by the Australian government banning exports of alumina to Russia, as part of the sanctions imposed on Russia in response to its attack on Ukraine. Russian producer Rusal, which is not subject to any of the West’s current sanctions, owns the remaining 20% of QAL.
Alumina prices fell sharply when Australia-origin cargoes needed to be re-assigned to new buyers at short notice.
Many consumers bought up spot cargoes to cover their short-term requirements, reducing the available pool of buyers.
“There is enough Pacific alumina around,” a second trader said. “People are able to offer cargoes [but] no one is super-desperate to buy it right now so I think prices [have further to] drop.”
Atlantic differential widening
The premium for Atlantic-region material over Pacific material jumped while discussions were taking place during the Miami conference, with news of a Brazilian cargo being on offer to the market.
It will command a premium of at least $40 per tonne given the tightness in the region, many said.
“With the freight situation, and the Brazil cargo being like gold dust, it does not surprise me to hear [suggestions of] a $40 per tonne [premium],” one producer said.
Not all buyers are willing to pay such a premium for this cargo, however. Many do not need the material although they acknowledge a shortage of it in the region.
“A lot of people are having to ship a lot of material over to the Atlantic from the Pacific, at very wide freight differentials,” one market participant said.
The Brazilian cargo, which sold at $413 per tonne fob Brazil, achieved a premium of $43 per tonne over Australian material when it traded on April 29. This compares with the Australian alumina price of $370 per tonne fob Western Australia.
This was the first Brazilian spot cargo heard sold since late February.
LME aluminium price versus alumina
Another topic of discussion was the price of alumina compared with the London Metal Exchange three-month aluminium price as a percentage of the total aluminium price. Some market participants believe this could dip as low as 10%.
The percentage basis had been as low as 11% during April, down from 12% a fortnight earlier and from 16% late in March. Further pressure came from a correction to the LME three-month aluminium price for the first time since February - down to below $3,000 per tonne on May 3 from $3,200 per tonne earlier.
The Australian alumina price at $370 per tonne fob WA, against an LME aluminium price of $2,926 per tonne on Wednesday morning, put the percentage basis at 12.6%.
Conflicting sentiment was another key topic at the conference, with the price trends in alumina and aluminium diverging since the start of Russia’s war on Ukraine on February 24.
Alumina prices have fallen since Australia imposed its export ban, and there have been few supporting factors for the market given the increased supply already available, and with market participants awaiting the expected restart of the Jamalco refinery in Jamaica in the summer.
Market participants were also apprehensive about further production cuts in Europe due to rising energy costs or elsewhere given various geopolitical and logistical challenges.
“I am bearish about alumina for the longer term,” the producer identified above said. “I think there is enough supply, and we could see more production cuts [because of] the high energy costs. If there are more aluminium cuts, then there will be more alumina around.”
Another market participant, however, said that sentiment is bullish for alumina, noting that new capacity is coming online in China and elsewhere in Asia, which would make up for the loss of capacity in Europe.
Guinea calls out its bauxite miners
In his keynote presentation, Moussa Magassouba, Guinea’s Minister of Mines and Geology, said that bauxite miners operating in his homeland must build refineries in the country and respect their obligations - or face administrative action.
If the country’s lack of refineries endures, he said his government “won’t hesitate to do what others did.” He was referring to Indonesia’s ban on bauxite exports, which was announced in 2019 but then delayed due to the Covid-19 pandemic. That ban is now expected to come into force by the end of this year.
Representatives from other bauxite mining countries, such as Jamaica, joined the conversation to share their own frustrations and to increase dialogue between countries about tackling similar issues.
Eyes still on Aughinish
Another topic of interest at the conference was the undecided future of Rusal’s Aughinish alumina refinery in Ireland.
The refinery has continued to run as normal to date, with shipments continuing. Since it is a key employer in the region, there was little doubt among market participants that operations will keep running even in the event of a change of ownership.
On April 20, a Rusal spokesman told Fastmarkets that majority shareholder En+ intends to “carve out some of the international assets of the company” but declined to comment further.
“The situation is interesting because there are a lot of questions and not many answers,” one market participant said. “Everyone wants a crystal ball.”
There has been no comment on when or even if Rusal will put the Aughinish refinery up for sale but market participants - especially those in Europe - are closely watching the situation given that the Irish refinery is the continent’s largest, with capacity of almost 2 million tonnes per year.