Supply trends and prospects for fused alumina

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1 Supply trends and prospects for fused alumina Jessica Roberts Information Services Metal Bulletin/Industrial Minerals, 2 nd Asian Bauxite & Alumina October 2012, Marina Mandarin, Singapore

2 Disclaimer The statements in this presentation represent the considered views of Information Services Ltd. It includes certain statements that may be deemed forward-looking statements. All statements in this presentation, other than statements of historical facts, that address future market developments, government actions and events, are forward-looking statements. Although Information Services Ltd. believes the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include changes in general economic, market or business conditions. While Information Services Ltd. has made every reasonable effort to ensure the veracity of the information presented it cannot expressly guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the statements in the presentation should be used for general guidance only.

3 Summary Outline of global alumina and bauxite supply Focus on non-metallurgical grades & fused alumina Global fused alumina producers Balance of BFA vs. WFA Spotlight on Chinese FA industry Feedstock supply chain Energy issues Government policies Prospects for future supply Bauxite & Alumina Asia 2012 Jessica Roberts,

4 Global metallurgical alumina output was 92.11Mt in 2011, led by China South America (16%) Africa & Asia (8%) North America (6%) China (37%) West Europe (6%) East & Central Europe (5%) Oceania (21%) Source: International Aluminium Institute (IAI) Bauxite & Alumina Asia 2012 Jessica Roberts,

5 Output of non-met. alumina was 5.92Mt in 2011, split between calcined and chemical grades Non-met. alumina is broadly split into two categories: Chemical (58%) Calcined (42%) Source: Information Services, IAI Chemical grades: Aluminium sulphate Aluminium fluoride Aluminium hydrate Calcined grades: White fused alumina (WFA) Ceramics Refractories Tabular Bauxite & Alumina Asia 2012 Jessica Roberts,

6 Output of non-met. bauxite was 10.4Mt in 2011 Other (1%) Slag adjusters (9%) Chemicals (8%) Proppants (10%) Abrasives (22%) Refractories (26%) Cement (24%) Main non-met. (raw) grades: Portland cement Calcium aluminate cement Slag adjusters (steel) Main calcined grades: Abrasives/BFA Refractories Proppants Source: Information Services Bauxite & Alumina Asia 2012 Jessica Roberts,

7 Fused alumina

8 What is fused alumina? High hardness and melting temperature good abrasive/ refractory materials Two main grades (BFA/WFA) based on different feedstocks BFA: calcined bauxite (80%) + ground coke (5%) + iron borings (15%) fused in EAF at 2,000 C WFA: calcined, low soda Bayer alumina fused in EAF at 2,000 C (can add chromite for extra toughness) Courtesy: Treibacher Schleifmittel Bauxite & Alumina Asia 2012 Jessica Roberts,

9 Fused alumina comprises two distinct products, BFA and WFA, based on different feedstocks Brown fused Average composition of >94% Al 2 O 3 Feedstock: abrasive-grade calcined bauxite Production: focused in China (~85%) Main markets: abrasives and refractories Market size: Mtpy Bauxite & Alumina Asia 2012 Jessica Roberts, Courtesy: Orient Abrasives, India

10 Fused alumina comprises two distinct products, BFA and WFA, based on different feedstocks White fused Higher purity grade (>99.5% Al 2 O 3 ) Feedstock: low soda calcined alumina Wider regional spread in output Main markets: abrasives and refractories Market size: ktpy Courtesy: Treibacher Schleifmittel, Austria Bauxite & Alumina Asia 2012 Jessica Roberts,

11 China is the world s largest fused alumina producer with 3.5-4Mtpy capacity Top Chinese producers (over 100,000t capacity): Bosai Minerals Group Guizhou Dazhong Qisha Zhengzhou Wei Er Special Materials Guizhou Sanshan Abrasives - Main production centres are Guizhou, Henan, and Shanxi - 20 producers have over 40kt capacity, hundreds of smaller ones exist Bauxite & Alumina Asia 2012 Jessica Roberts,

12 Producers outside China are bigger enterprises with greater geographical spread Top producers outside China (over 100,000tpy capacity): Elfusa, Brazil (Curimbaba) Imerys Treibacher Schleifmittel, Austria C-E Minerals, USA Saint-Gobain, France Washington Mills Electro Minerals, N. America Tend to have numerous production bases, including Chinese (eg. Treibacher has subsidiaries in 9 countries) Bauxite & Alumina Asia 2012 Jessica Roberts,

13 China dominates international trade, accounting for nearly 70% of the total in % 24% 4% 41% 22% 4% 68% Chemical (58%) 4% Calcined (42%) 23% Source: Global Trade Atlas, Bauxite & Alumina Asia 2012 Jessica Roberts, Imports Exports

14 US$/tonne Exports (000t) China accounts for majority of exports Chinese fused alumina exports and average unit price ( ) Exports Bauxite & Alumina Asia 2012 Jessica Roberts, Price per tonne (China) Source: Global Trade Atlas

15 US$/tonne Exports (000t) but ROW prices are higher, reflecting higher WFA/BFA ratio ROW fused alumina exports and average unit price ( ) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, ROW exports (ex-china) Bauxite & Alumina Asia 2012 Jessica Roberts, ROW price per tonne (ex-china) Source: Global Trade Atlas

16 Situation in China

17 Top 10 producers in China only account for 26% of domestic fused alumina capacity Producer Location Capacity (tpy) & grade Bosai Minerals Nanchuan, Chongqing 250,000 BFA Guizhou Dazhong Qisha Qingzhen, Guizhou 100,000 BFA, WFA Zhengzhou Wei Er Special Materials Dengfeng, Henan 100,000 BFA, WFA Guizhou Sanshan Abrasives Guiyang, Guizhou 100,000 BFA Henan Great Wall Special Refractory New Materials Mianchi, Henan 80,000 BFA, WFA Shanmenxia Fused Corundum Sanmenxia, Henan 80,000 BFA, WFA Shanxi Tiankun Special Materials Gaoping, Shanxi 80,000 BFA Wuhan Dazhong Qisha Abrasives Wuhan, Hubei 70,000 BFA Henan Ruishi Special Refractory Luoyan, Henan 60,000 BFA Henan Yilong High & New Materials Yichuan, Henan 60,000 BFA, WFA Total - 980,000 Source: Information Services

18 and overcapacity is rife, with utilisation rates less than 50% in 2011 Main (non market-driven) factors affecting utilisation: 1. Government policies 2. Increased overall production costs 3. Competition from aluminium smelters Bauxite & Alumina Asia 2012 Jessica Roberts,

19 1. Chinese government policies are affecting BFA supply Banned inefficient smelting technology (furnace transformers must be >3,000KVA) Consolidation encouraged: closure of low-quality, lowtech operations (account for approx. 50% of fused alumina capacity) BFA export tax of 15% implemented end-2008 to discourage exports Exporters must be VAT registered and/or own a mine Bauxite & Alumina Asia 2012 Jessica Roberts,

20 2. Increased production costs owing to raw material quality/supply Prior selective mining/ cherry-picking has lowered overall quality of current bauxite output Shortage of suitable grades has led to higher bauxite prices Only 3 Chinese producers now specifically mine nonmet. grades Bauxite & Alumina Asia 2012 Jessica Roberts,

21 2. and high energy costs Lower grades of bauxite require more energy for fusing (average feedstock grade now 70% Al 2 O 3, 5-15% SiO 2 ) Unreliable electricity supplies (brownouts and power restrictions), especially from hydroelectric sources Electricity restrictions in severely impacting furnace operating rates (40% in Henan, 50% in Shanxi, 30% in Guizhou) Bauxite & Alumina Asia 2012 Jessica Roberts,

22 3. Competition from aluminium smelters Non-met. bauxite grades diverted to smelter grade alumina producers during high aluminium demand When aluminium demand is lower, refineries use excess EAF capacity to produce fused alumina Refineries may have cheaper bauxite source and better energy supplies Bauxite & Alumina Asia 2012 Jessica Roberts,

23 Fused alumina supply prospects: China In addition to domestic factors, supply could be affected by: Indonesian ban on bauxite exports higher demand for domestic resources Effect of WTO ruling in January 2012 on future trade policy (taxes, quotas, licences) China s economic situation Bauxite & Alumina Asia 2012 Jessica Roberts,

24 Fused alumina supply prospects: rest of world The world economy and future aluminium production Access to raw material feedstock (esp. bauxite for BFA) Demand from major consuming markets: Abrasives = general manufacturing, automotive Refractories = iron & steel, cement, non-ferrous metals, glass & ceramics Bauxite & Alumina Asia 2012 Jessica Roberts,

25 Thank you!

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