CBIX steady, alumina soars, freight rates up

CBIX eased 0.9% to close the week at US$45.4/dmt as some lower Value in Use (ViU) trades from Malaysia balanced higher ViU trades from Australia and Brazil. Prices in Malaysia have increased slightly, due to the influence of extended mining ban, with unwashed material at US$27/dmt FOB and a few washed cargos at US$39/dmt FOB.

Alumina prices in China have soared since the week-long National Day holiday, with Northern prices up 17.3% (RMB374/t) to RMB2,533/t and the South up 17.9% (RMB354/t) to RMB2,375/t . The drivers remain the same; a shortage of spot material combined with smelters seeking to build stocks as production ramps up to take advantage of higher primary prices. Cost pressures (coal and caustic soda) are also influencing prices. In the northwest, some Xinjiang smelters are holding as few as 10 days' alumina stock. Imported alumina inventories are also low and, as forecast last week, price increases in the ROW are now following suit, with FOB Australia prices up 9.8%. Although it will be difficult for China’s domestic industry to satisfy demand quickly, some traders remain cautious, believing there are several large parcels of ‘hidden' stocks waiting to be sold at these elevated prices. In the short term, however, we believe prices are likely to remain high.

Freight rates increased over the week, with timecharter rates for both capesize and panamax vessels rising slightly to build on bunker (fuel) price rises. As a result, Guinea–Shandong freight rates were up 4% (US$0.6/wmt) to US$14.2/wmt and the North Australia–Shandong rates were also up 4% (US$0.2/wmt) to $5.4/wmt.

Testimony to ongoing internal ructions within Indonesia regarding the minerals export ban, and in contrast to comments attributed to him a week earlier, Indonesia's Acting Minister of Energy and Mineral Resources, Luhut Pandjaitan, was reported last Wednesday 12th October, as saying "We almost definitely won't give a relaxation for nickel and bauxite", but also added that the matter had to be studied further. Meanwhile, pro-export groups continue to lobby hard for a resumption in exports, with the Association of Indonesian Bauxite and Iron Ore Producers calling for a 40 million tonne per year quota on bauxite exports. We maintain our view Indonesia’s mineral export ban will ultimately be relaxed, allowing limited exports under a higher taxation regime.

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