Bauxite prices CFR China held steady over the 1st week of September

Bauxite prices CFR China held steady over the week, with the CBIX index marginally higher (0.5% or US$0.25/dmt), closing at US$48.6/dmt on the back of higher priced bauxite from Guinea and Brazil, offset by lower priced Malaysian material.

As reported in our release last week, Malaysia has extended its mining ban for a third time, now through to the end of calendar 2016. Reaction to the extension by local miners was a mixture of surprise and disappointment, although many in the industry thought the extension a mere formality. According to official sources, there are 4.13 million tonnes of stock external to the port, requiring export before the ban will be lifted. However, local miners claim the stocks are closer to 1-2 million tonnes. Despite 39 special Approved Permits (AP’s) being issued for clearing stocks, only a few have been validated. Those that have been validated are seeking higher export prices than the current market will bear, leading to the likelihood of a slow destocking process.

Meanwhile, Weiqiao’s exports from Guinea have virtually killed off the market for Malaysian (and Indian) bauxite, with exports from Guinea likely to top 14 million tonnes in 2016. Given this scenario, Malaysian miners are not positive about stocks clearing by year-end, nor are they positive about exports returning to pre-ban levels post-ban. Some Malaysian miners are turning to Johor, where the export situation is clearer, although others say there is insufficient bauxite in the region to make the move worthwhile.

Despite the turmoil, Malaysian FOB prices are still quoted at US$26/dmt for unwashed material, with washed material fetching US$38/dmt FOB (CBIX US$39.9/dmt).

Chinese domestic alumina prices continued their recent rally, with the North up 2.5% (RMB47/t) to RMB1,934/t (US$290/t including VAT) and the South up 1.6% (RMB30/t) to RMB1,880/t (US$282/t including VAT). The recent rally has been fuelled by increased buyer activity from smelters looking to ramp up production, as well as some restocking by smelters in China's north-west. Refiners, for their part, are also pushing harder for higher prices, as input costs for coal and caustic are forcing production costs higher.

Capesize vessel time charter rates rose significantly (up 32%), which combined with slightly higher bunker (fuel) prices to push the Guinea-Shandong rate up approximately 15% (US$1.7/wmt) to US$12.3/wmt. Panamax freight rates remained essentially flat with the North Australia to Shandong route at US$4.9/wmt (up 1% or US$0.1/wmt).

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