Bearish Downstream Sentiments Pressurizes Bauxite Market In China

Singapore: As per ChemAnalyst, the prices of Bauxite have remained firm for the last few weeks in China. Sluggish demand for downstream Alumina from the construction sector has contributed to the sturdy prices of Bauxite. Since the mid of the first quarter of 2022, China's arbitrage and economic activities have been halted, giving rise to soaring Aluminium inventories at the port's warehouses against the tight supply of Bauxite. Although, the ease of restrictions by the Chinese authorities and resumption of public movement coupled with better transportation activities, the inventories are gradually moving out. However, the local traded are inclined to release the stockpile at a lower cost to restore the operations.

In China, Aluminum's downstream market is also facing enough pressure from a strong US Dollar and weak demand from end-use sectors. The Zero-Covid policy employed in manufacturing hubs in China has severely impacted the supply chain and contracted factory activities. Moreover, the ban imposed by the Indonesian Government on Bauxite exports has caused a minor impact on China, as it has diversified its resources to Guinea and Australia majorly. In Guinea, the Bauxite mining is back on track after a worker's strike, halting the production for a few days. China imports more than 54% of its Bauxite from Guinea; thus, any adverse situation that occurs there directly impacts the market sentiments of the commodity in China.

It is also to be noted that the sanction imposed on Russia after its invasion of Ukraine has made the nation rely on alternative markets in Asian countries for its alumina consumption. The quantity of Alumina exported to Russia has drastically risen in FY2022 compared to previous years commencing China to boost its alumina production.

As per ChemAnalyst, the prices of Bauxite are likely to boost in the forthcoming weeks amidst the active demand from the construction sector. The Russia- Ukraine war situations are unlikely to vanish soon, thus, capturing more demand for the downstream Alumina from Russia and benefitting China on extensive terms.