CBIX steady, Chinese alumina prices creeping higher

Bauxite prices CIF China were mostly stable over the week, with CBIX up 0.3 per cent (US$0.1/dmt), closing at US$47.3/dmt. Malaysian cargos are re-appearing in the market, despite the mining ban still being in place, and at price points similar to those pre-ban. We're forecasting a higher portion of Malaysian cargos to enter China once the ban is lifted mid-September, and at a price point marginally higher than the pre-ban level. Higher priced Atlantic cargos continue to offset the lower Malaysian prices, resulting in a relatively stable CBIX index over the week.

Washed Malaysian bauxite FOB is selling for US$38/dmt FOB (CBIX US$42.3/dmt), inline with pre-ban prices. Interestingly, sentiment in Malaysia now seems to be turning positive, as miners and exporters alike prepare for a resumption in trade from mid September. Chinese refiners will be in Malaysia this week finalising details for the resumption.

Chinese domestic alumina prices also started to lift last week, with the North price up by a significant 5.1 per cent (RMB90/t) to RMB1,846/t (US$277/t including VAT) and the South registering a gain of 2.8 per cent (RMB50/t) to RMB1,830/t (US$275/t including VAT). The higher prices reflect disruptions to supply, due to the red mud dam incident at Wanji, Henan, as well as heavy rains disrupting transport and supply from Huaxing (Shanxi). Several other refineries have also been reported to have cut production. With prices currently close to cash costs, some producers (and traders) have been holding out for higher price before releasing stock. While these circumstances seem to have buoyed prices in the short term, our view is the market still lacks the fundamental drivers necessary to induce a more structured price rally.

Capesize freight rates have held last weeks' gains, with the Guinea to Shandong rate holding at US$10.2/wmt, compared with US$8.8/wmt two weeks ago. Charter rate increases contributed most to the gain (67 per cent), with higher fuel prices making up the remainder. In comparison, Panamax rates have been less impacted, as charter rates have remained relatively stable. The North Australia to Shandong Panamax rate was up $0.3/wmt over the past two weeks, currently sitting at US$4.9/wmt.

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