Bauxite Stockpiles Dwindling in China, Could Make Aluminum Soar

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Indonesia’s raw ore export ban has been in place since January, and while its effects are apparent in the nickel market, it has not done much to the price of aluminum. That might soon change.

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Bauxite ore is refined into alumina, which is then refined further into aluminum. It takes four to seven tons of bauxite to make one ton of aluminum. Despite the Indonesian export ban, aluminum prices have been stagnant so far in 2014.  In the period from 2007 to 2013, Indonesia accounted for approximately 60% of global exports of bauxite.

In 2013, China obtained about 68% of the bauxite it needed for aluminum refining from Indonesia. That totaled approximately 48.7 million metric tons, according to Wall Street Daily.

So, when China was aware of Indonesia’s plans to ban bauxite exports, it stockpiled months’ worth of the ore. But now that stockpile is dwindling – and may be completely exhausted within a year. That’s of particular concern to China, which is the world’s biggest consumer of aluminum. China also produces half the global output of aluminum.

On Wednesday, May 28, the cash price of primary Indian aluminum experienced the biggest change, rising 1.0 percent to INR 108.30 ($1.83) per kilogram. The cash price of primary aluminum saw a 0.2 percent decline on the LME to $1,777 per metric ton. On the LME, the 3-month price of aluminum showed little movement yesterday, hovering around $1,819 per metric ton.

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Chinese aluminum prices were flat for the day. For the fifth day in a row, the price of Chinese aluminum scrap remained essentially flat at CNY 12,250 ($1,960) per metric ton. The price of Chinese aluminum billet remained essentially flat at CNY 13,590 ($2,174) per metric ton. The price of Chinese aluminum bar was unchanged at CNY 14,200 ($2,272) per metric ton. The Chinese aluminum cash price saw little movement yesterday, closing out around CNY 13,355 ($2,137) per metric ton.

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