Plans to resume production in domestic bauxite mines are still unclear, and imported ore prices are running high; tight supply at the mine side is the main factor limiting the utilization of some idle domestic alumina production capacity, and it is also the root cause of difficulties in domestic alumina supply to increase significantly in the short term.
The Zhitong Finance App learned that Guolian Securities released a research report saying that according to SMM, as of mid-May 2024, bauxite mines that were discontinued in the Jinyu region had not actually resumed production, bauxite production plans in the Sanmenxia region of Henan are still unclear, and domestic bauxite may maintain a pattern of scarce supply. Plans to resume production in domestic bauxite mines are still unclear, and imported ore prices are running high; tight supply at the mine side is the main factor limiting the utilization of some idle domestic alumina production capacity, and it is also the root cause of difficulties in domestic alumina supply to increase significantly in the short term. In terms of downstream demand, factors such as the resumption of production in Yunnan have increased the operating capacity of electrolytic aluminum. The contradiction between supply and demand for alumina has intensified, catalyzing price increases, and alumina production profits have increased significantly.
The main views of Guolian Securities are as follows:
The resumption of production in domestic mines is unclear, and the supply of upstream bauxite resources is tightening
According to the Ministry of Natural Resources, by the end of 2022, the country's bauxite reserves were about 676 million tons, a year-on-year decrease of 35.61 million tons. China's bauxite resources are mainly distributed in Guangxi, Henan, Guizhou, Shanxi and other regions, and the four provinces account for 92% of the country's reserves. Since 2023, the supply of bauxite has been tight due to mine reclamation, safety inspections, and open pit rectification in some regions. In 2023, the country's bauxite production was 65.52 million tons, a year-on-year decrease of 3.4%; from January to April 2024, the country's bauxite production was 17.83 million tons, a year-on-year decrease of 19.6%. According to SMM, as of mid-May 2024, bauxite mines that have been discontinued in the Jinyu region have yet to actually resume production. Plans to resume bauxite production in the Sanmenxia region of Henan are still unclear, and domestic bauxite may maintain a pattern of scarce supply.
The mining side's external dependence has increased, and imported ore prices are running at a high level
In 2023, the country's bauxite imports were 142 million tons, up 12.7% year on year. Among them, imported Guinea/Australia bauxite was 9932/34.61 million tons, up 40.9%/1.5% year on year; from January to March 2024, the country's bauxite imports were 36.34 million tons, up 1.9% year on year; among them, imported Guinea/Australia bauxite was 2,700/7.97 million tons respectively, up 4.0%/24.6% year on year. As of May 17, 2024, the average CIF price of Guinea/Australian bauxite imports was 71/58 US dollars/ton respectively, up 7.6%/20.8% year on year, respectively.
Yunnan Electrolytic Aluminum Production Capacity Resumes, Alumina Demand Increased
In 2023, the country's alumina production was 79.81 million tons, up 2.7% year on year; from January to April 2024, the country's alumina production was 26.46 million tons, up 3.1% year on year. In terms of electrolytic aluminum, in 2023, the country's electrolytic aluminum production was 41.59 million tons, up 3.7% year on year; from January to April 2024, the country's electrolytic aluminum production was 14.24 million tons, up 7.1% year on year; the growth rate of electrolytic aluminum production was higher than the growth rate of alumina production. Entering the second quarter of 2024, due to improved electricity supply in Yunnan Province compounded by high aluminum prices, local smelters started the second round of production. As of May 10, 2024, the annualized operating capacity of Yunnan was about 5.15 million tons, an increase of about 660,000 tons over the beginning of March; moreover, the production capacity of each smelter in Xinjiang and Guangxi, which had previously been discontinued due to maintenance, etc., was put back into operation; the country's electrolytic aluminum operating capacity may maintain an upward trend.
Alumina prices may remain high, and alumina production profits will increase significantly
Guolian Securities pointed out that plans to resume production in domestic bauxite mines are still unclear, and imported ore prices are running high; tight supply at the mine side is the main factor limiting the utilization of some idle domestic alumina production capacity, and it is also the root cause of difficulties in domestic alumina supply to increase significantly in the short term. According to Baichuan Yingfu statistics, as of April 30, 2024, the country's alumina production reduction and maintenance production capacity involved a total annual production capacity of 12 million tons. In terms of downstream demand, factors such as the resumption of production in Yunnan have increased the operating capacity of electrolytic aluminum. The contradiction between supply and demand for alumina has intensified, catalyzing price increases, and alumina production profits have increased significantly. As of May 17, 2024, the average price of alumina nationwide was 3,719 yuan/ton, an increase of 29.3% over the previous year; the profit of alumina production using domestic mines/imported ore was 972/738 yuan/ton, respectively, up 877/723 yuan/ton.
Risk warning: macroeconomic environmental risks; risks of industrial policy changes; downstream demand falling short of expectations; double carbon and energy structure risks; safety and environmental risks.