How Russia-Ukraine Hostilities Keeping Bauxite Market Volatile in Early Q2

The ripples from the Russia-Ukraine conflict coupled with strong demand and supply shortages this year sets the global market dynamics for Bauxite to be in a state of flux. The benchmark Platts Australia Alumina climbed to multi-year records during the first quarter of 2022, unseen since 2018. The price of Platts FOB Western Australia Alumina has settled at USD 540/MT, exceeding the USD 480/MT pricing of the fourth quarter of 2021.

However, Australia's ban on Alumina and Bauxite exports to Russia resulted in an immediate oversupply. Prices plunged to USD 475/MT FOB within days, declining below the USD 398/MT key mark on April 8, 2022.

After the Beijing Winter Olympics, the prices of Alumina in the global market were expected to ease in China. But the domestic prices for Alumina were unprecedented due to the curtailed refining activities in northern China, which gradually improved post-Olympics. In early March, strict COVID-related policies restricted logistics and traffic flow. Due to this, Alumina's inventory accumulation at the ports has crossed roughly a total of 550 MT, down by 3.1 MT weekly, including 62 MT at Qingdao, 281 MT at Bayuquan, 125 MT at Panjin, and 51 MT at Jinzhou, 30 MT at Lianyungang, and 19 Mt at Qinzhou. Amidst that, various AI processors hampered their operation to ease the difficulties of raw material shortages and halted the increasing inventories of finished products. According to a few market players, local Chinese refineries were asked to pay more than USD 460/MT for the spot supply of the quotations.

Later this week, Aluminium and Bauxite refineries in China resumed their everyday operations. The Bauxite miners have further increased production, ensuring ample supply for thriving local refineries. The cost difference between China and overseas has shrunk from USD 240/MT to USD 65/MT. The narrowing price spread corroded export profits, which heightened wait-and-see sentiment among exporters, coupled with the severe pandemic.

As per ChemAnalyst, "The prices of Bauxite are expected to increase globally on the back of supply shortage and strong demand. The market players expect that China can set up an inventory in Guinea to meet its demand for Bauxite. However, Guinean authorities kept the prices of Bauxite high to strengthen the economic development of Guinea, laying cost pressure on China. Thus, prices will soar in upcoming months."