India’s neighbor China may well be left with the proverbial short end of the stick if India doubles the export tax on aluminum-rich bauxite to 20 percent from its current 10 percent. The proposition was part of India’s annual budget proposals.
Analysts predict that international bauxite supplies will become constrained in the fourth quarter of this year, and even more so next. Following the ban on supplies of raw commodities including bauxite by Indonesia, there may not be enough to fill the void in the coming months. Bauxite is a critical raw material in the production of aluminum.
China, one of the chief beneficiaries of Indonesian bauxite, had started relying on India in the past year or so to cover the shortfall, but when the 20 percent export tax kicks in, about 45 days from now when India’s parliament approves the annual budget proposals, China may have to start looking elsewhere to source its bauxite supplies. Or be ready to pay more.
Since the demand-supply ratio internationally favors the former, there’s also bound to be a rise in market prices of the mineral itself, and if China fails to find cheaper supply – there’s some coming in from Australia and Brazil but not enough – it will have no option but to cough up more to India for the exact same tonnage. After all, 90 percent of India’s bauxite exports are picked up by China, though there may be a question mark over some of its quality.
In March 2013, as reported by MetalMiner, that the Indian Government imposed a 10 percent export duty on the outflow of bauxite from the country. It was done largely to ensure better domestic availability.
In May this year, India became the second-largest exporter of bauxite by sea to China, after Australia, with a share of 25 percent. Indian bauxite prices are currently in the range of US $32-$37 per ton.