Industry Trend Analysis - Bauxite: Asian Countries To Drive Growth - DEC 2017


BMI View: Global bauxite production growth will accelerate over the com ing years, as new projects come online in Australia, India's production ramps up, and Indonesia re-enters the market following the end of the mineral ore export ban. Additionally, Guinea will prove a bauxite production bright spot, supported by a strong project pipeline.

Australia

Australia's bauxite sector will maintain steady output growth, supported by a solid project pipeline. Australia holds 20 of the 37 bauxite projects in our BMI Mines Database. Namely, Rio Tinto's expansion at the Weipa mine and the new Amrun project will drive growth. In Q317, Rio Tinto reported a 4% y-o-y increase in bauxite production to 12.9mnt, driven by strong performances at the Gove and Weipa mines. While bauxite accounts for less than 5% of Australian mining value, the country is the global top producer, providing about 30.6% of global supply in 2017. Further, Australia will remain a top bauxite exporter to China, although will lose some market share over the coming quarters to returning Indonesian supply. In January, US firm Alcoa announced plans to increase bauxite exports from its operations in Western Australia after the first commercial shipment of bauxite from the company's Huntly mine took place in December 2016.

Australia, Indonesia To Drive Growth
Select Countries - Bauxite Production (mnt)
e/f = BMI estimate/forecast. Source: National Sources, USGS, BMI

Indonesia

Indonesia's bauxite production will ramp back up over the next five years, following the relaxation of the mineral ore export ban. On January 12, the Indonesian government moderated the mineral ore export ban that was implemented in January 2014, ending the ban on bauxite exports entirely ( see ' Ban Moderation To Boost Bauxite, Nickel Ore Production ' , January 16 2016). In July 2017, the government allowed PT Dinamika Sejahtera Mandiri to export 2.4mnt of bauxite, and in September 2017 PT Laman Mining received an annual export quota of 2.9mnt of bauxite. In April 2017, the Indonesian Mining Ministry announced their recommendation to PT Aneka Tambang (Antam) to export 2.7mnt of nickel ore and 850kt of bauxite. The company started its first exports in May 2017. The country will reclaim its share of bauxite exports to China, supported by closer proximity and lower-cost production than Australian mines. We forecast Indonesia's bauxite production growth to register an annual average of 61.9% during 2017-2026, compared to 92.8% during 2012-2016. We expect output to increase from 5.0mnt in 2017 to 11.9mnt by 2021.

Ramp Up Underway
Indonesia - Bauxite Mine Production (mnt)
e/f = BMI estimate/forecast. Source: USGS, BMI

China

China will experience stagnant bauxite production growth, due to deteriorating quality of reserves and government-led initiative to consolidate the sector over the coming years. We forecast China's bauxite output to edge higher, from 62.6mnt in 2017 to 67.8mnt by 2021. In 2017, China will account for 23.6% of global bauxite production, compared to over half of global aluminium production. This disparitywill support China's rising bauxite imports and investments in bauxite production abroad. For instance, in June, a Ghanaian delegation visiting China reportedly signed a memorandum of understanding for the latter to develop a USD10bn bauxite project in Ghana, including the construction of alumina refineries and railway infrastructure. Previously, in 2016, Chinese firm DADA Holdings purchased the St. Ann bauxite operation in Jamaica (along with an alumina refinery in the US) from Noranda Aluminum for USD24.4mn. In September, Chinese-owned Moly Mines announced a bid to acquire Australian Gulf Alumina, looking to invest AUD60mn to develop a high-grade bauxite project. The deal faces opposition from Australian authorities over a scandal surrounding parent firm Hanlong Mining.

Competition To Tighten With Return Of Indonesia
China - Bauxite Imports By Country (mnt)
Source: Trade Map

India

India's bauxite production growth will accelerate, in order to serve growing demand from the domestic aluminium industry and supported by government ordinance. In June 2017, the Indian government identified 71 major mineral blocks in seven states that will be auctioned in FY2017. In an official statement, the Ministry of Mines said out of these blocks, bauxite accounts for three blocks in Gujarat, one block in Jharkhand, and four blocks in Maharashtra. Also in June, integrated aluminium producer National Aluminium Company Limited (Nalco), started the process to open a new bauxite deposit near its existing Panchpatmali mines in Odisha. In 2016, the Ministry of Mines increased the lease area for mining of bauxite from 10sq km to 50sq km in the state of Odisha to encourage development, and, as part of the Union Budget, India reduced export duties for bauxite from 20% to 15%. We forecast Indian bauxite production to grow from 26.1mnt in 2017 to 43.7mnt in 2021, averaging an annual growth rate of 14.7% during 2017-2021, significantly higher than the annual average 3.9% growth over 2012-2016. This will be due to the five-fold increase in mining lease area in Odisha. Despite this positive outlook for India's bauxite mining sector, tightening environmental regulations and tribal tensions pose downside risks, by slowing down new projects.

India To Gain Market Share
India - Share Of Global Bauxite Production (%)
e/f = BMI estimate/forecast. Source: BMI, USGS

Guinea

Guinea's bauxite sector will see solid production growth over the coming years, driven by a strong project pipeline. Guinea holds the second largest amount of new bauxite projects, behind Australia, with 11, in our Mines Database. For instance, in June 2017 France's Alliance Miniere Responsable (AMR) signed a deal with Societe Miniere de Boke (SMB) to exploit bauxite near the Boke region. The deposit contains an estimated 430 million tonnes (mnt) of bauxite, and the mining company will aim to produce 5mnt per year. Alufer Mining will continue to develop the Bel Air project in Guinea, planning to produce 5.5mnt of bauxite per year, which will ramp up to 10mnt per year over a 15-year period. The mine would potentially increase the country's current output of 21mnt by 25%. We forecast Guinea's bauxite output to climb from 21.7mnt in 2017 to 20.7mnt by 2021.

Guinea Bauxite A Project Bright Spot
Select Countries - Bauxite Mines By Phase
Source: BMI Mines Database
Select Countries - Bauxite Production Forecasts
2014 2015e 2016e 2017f 2018f 2019f 2020f 2021f
e/f = BMI estimate/forecast. Source: National Sources, USGS, BMI
Global Global Bauxite Mine Production, mn tonnes 245.0 293.0 262.0 275.8 293.9 318.9 351.9 370.0
Global Global Bauxite Mine Production Volumes, % y-o-y -13.4 19.6 -10.6 5.3 6.6 8.5 10.3 5.1
Guinea Bauxite Mine Production, mn tonnes 17.30 18.10 19.70 21.67 25.68 27.68 29.37 30.66
Guinea Bauxite Mine Production Volumes, % y-o-y -7.98 4.62 8.84 10.00 18.50 7.80 6.10 4.40
Australia Bauxite Mine Production, mn tonnes 78.60 80.90 82.00 84.46 87.84 101.01 121.72 127.81
Australia Bauxite Mine Production Volumes, % y-o-y -3.08 2.93 1.36 3.00 4.00 15.00 20.50 5.00
China Bauxite Mine Production, mn tonnes 55.00 65.00 65.00 65.13 66.11 67.10 68.44 69.95
China Bauxite Mine Production Volumes, % y-o-y 17.02 18.18 0.00 0.20 1.50 1.50 2.00 2.20
India Bauxite Mine Production, mn tonnes 16.50 19.20 22.08 26.05 30.87 35.51 39.77 43.74
India Bauxite Mine Production Volumes, % y-o-y 7.14 16.36 15.00 18.00 18.50 15.00 12.00 10.00
Indonesia Bauxite Mine Production, mn tonnes 2.56 0.20 1.00 5.00 7.50 8.63 9.92 11.90
Indonesia Bauxite Mine Production Volumes, % y-o-y -95.41 -92.09 395.05 400.00 50.00 15.00 15.00 20.00
Malaysia Bauxite Mine Production, mn tonnes 3.26 35.00 1.00 1.03 1.05 1.07 1.09 1.10
Malaysia Bauxite Mine Production Volumes, % y-o-y 1,459.81 973.62 -97.14 2.63 2.26 1.89 1.52 1.15
Jamaica Bauxite Mine Production, mn tonnes 9.80 9.63 8.50 8.08 8.16 8.28 8.44 8.65
Jamaica Bauxite Mine Production Volumes, % y-o-y 3.81 -1.73 -11.73 -5.00 1.00 1.50 2.00 2.50
Russia Bauxite Mine Production, mn tonnes 5.30 5.49 5.55 5.68 5.79 5.89 5.95 5.99
Russia Bauxite Mine Production Volumes, % y-o-y -0.38 3.60 1.00 2.43 2.00 1.57 1.14 0.71
Brazil Bauxite Mine Production, mn tonnes 34.80 33.90 34.50 34.67 35.71 36.96 38.44 40.17
Brazil Bauxite Mine Production Volumes, % y-o-y 7.08 -2.59 1.77 0.50 3.00 3.50 4.00 4.50
Global Key Bauxite Projects
Country Mine Company Capex (USDmn) Notes
Source: BMI Mines Database
Cameroon Ngaoundal & Minim-Martap Hindalco (45%) Hydromine (10%), Dubai Aluminum (DUBAL) (45%) 6,000 Expected Production: 8.5mnt/yr
Australia Amrun (Embley) Rio Tinto 1,900 Estimated production 22.8mnt/yr with the potential to increase to 50mnt/yr; Expected 2019
Guinea Koumbia Alliance Mining Commodities Limited (AMC) (90%) Government of Guinea (10%) 1,000 Measured and Indicated Resources: 305mnt; Production start year: 2019; Expected Production: 10,000kt/yr
Australia Weipa Rio Tinto 1,000 Expansion to start in 2017; Production and shipping is expected to start in H119; Reserves - 1.6bn tonnes
Australia Pisolite Hills MetroCoal 500 Resources - 134.6mnt
Australia Bauxite Hills Metro Mining 250 Reserves: 96.5mnt
Australia Fortuna Bauxite Resources - Indicated Resources - 46.3mnt; Project is at advance exploration stage; Environmental Baseline studies have been completed
Australia Ceres Bauxite Resources, HD Mining & Investments Pty Ltd - Inferred Resources: 14.8mnt
Australia Cardea (1&2) Bauxite Resources, HD Mining & Investments Pty Ltd - Inferred Resources: 6.4mnt
Australia Felicitas Yankuang Corporation (70%) Bauxite Resources (30%) - Measured Resources - 122.7mnt; Project is at exploration stage
Saudi Arabia Az Zabirah Maaden - Reserves: 3.4mnt
Guinea Bel Air Alufer Mining - Estimated production 5.5mnt/yr initial production rate, ramping up to a 10mnt/yr open pit operation; Expected 2019