China And The U.S. Compete For Bauxite, The Ore Of Aluminum

A global rush for bauxite, the ore of aluminum, is underway led by Chinese and U.S. companies.

In the South American country of Suriname, Chinalco, a state-owned Chinese miner and metal producer, has staked a claim to neglected bauxite deposits in the west of the country.

In Australia Alcoa, a big U.S. aluminum producer, is planning to restart bauxite mining in an area abandoned 10 years ago.

Driving the revival is a squeeze on the supply of bauxite and alumina, the intermediate product used to make aluminum.

Cutbacks in bauxite mining in the African country of Guinea, the world’s biggest exporter of the material, as well as in Australia, Brazil and China, has seen the price of Guinea ore rise by 50% to $75/t over the last two years while the Australian price is up 60% at $55/t.

Prices for alumina and aluminum have also moved higher led by alumina which has risen by 140% over the past 12 months thanks to supply outages and the closure of refineries in Australia.

Australian squeeze

The squeeze started late last year when Alcoa closed a 50-year-old alumina refinery at Kwinana on the west coast. followed by the temporary closure of the world’s biggest alumina refinery operated by Rio Tinto near the Queensland city of Gladstone.

Those events fed into a strong market for alumina which has in turn driven up the price of aluminum, forcing some metal smelters to trim production, including a move by Rusal, Russia’s biggest aluminum company to cut 250,000 tons of metal from its annual target.

For investors, the bauxite/alumina/aluminum industry is a complicated target but rising prices across the complex has worked in Alcoa’s favor with its share price up 64% over the last two months to trade at $46.42.

At the small end of the market, where there is a handful of mining minnows, one Australian company has delivered a big win for its shareholder.

Metro Mining, which produces bauxite on Queensland’s Cape York, has seen its share price rise by 215% over the past 12 months though at A6.3 cents the company is valued at a modest A$356 million.

Morgan Stanley, an investment bank, said it expects pressure to ease in alumina in the first or second quarter of next year.

“Alumina supply has lagged aluminum since 2022 with losses in Europe and Australia,” Morgan Stanley said.

“Historically, China has used its excess capacity to balance the market. However, China’s bauxite output is down by eight million tons so far this year, inland refineries are struggling, even with bauxite imports up by more than 14 million tons.”

“This year’s events highlight the vulnerability in the system, and risks remain, especially as China’s new capacity will largely be reliant on bauxite from Guinea, meaning any disruptions could be felt quickly.”