Capesize Shipments of Guinea Bauxite Forecasted to Slow Down in Q3 Amid Rainy Seasons
Based on AXSMarine data, during the first five months of 2023, the seaborne export of bauxite remained strong, exhibiting a growth of 2.3 million tons (3.4% year-on-year) compared to the corresponding period of the previous year. When examining the distribution across vessel types, there was a notable movement towards larger sizes. This was demonstrated as Capesizes carried 6.3 million tons more (increasing by 15.7% y-o-y). Meanwhile, shipments on smaller Over-Panamaxes and Panamaxes fell by 3.3 million tons (32.7% y-o-y) and 1.5 million tons (14.2% y-o-y), respectively.
Guinea continued to dominate the seaborne bauxite export market, accounting for 71.7% of seaborne volumes worldwide in the first five months of 2023. Australia followed closely with an 18.2% market share. However, Indonesia, which held a 10.7% market share in 2022, significantly cut its exports in 2023, reducing by 7.8 million tons compared to the same period last year. This decline was attributed to the announcement made by President Joko Widodo in late December 2022, stating that bauxite exports from Indonesia would be banned from June 2023. Notably, despite Indonesian shipments of bauxite on Capesizes falling by a significant 7.3 million tons, this was more-than-offset by an increase of 13.3 million tons in bauxite shipments on Capesizes from Guinea, all of which was destined for China.
Global alumina production in the first four months of 2023 remained consistent with 2022 levels, reaching 44.8 million tons, according to data from the International Aluminium Institute. A slight increase of 1.3 million tons from China was counterbalanced by a reduction of 1 million tons in Europe. In 2022, China represented 57% of global production, with Australia (Rio Tinto, Alcoa, Rusal) holding a 14% share and Brazil (Hydro, Rio Tinto, Alcoa) capturing an 8% share. It is worth noting that Australia and Brazil are both net-exporters of bauxite, with respective outputs of 100 million tons and 33 million tons in 2022. Since they are self-sufficient in bauxite supply, their alumina output doesn’t influence changes in global bauxite shipments.
According to the sample data collected by Aladdiny, China possessed a total alumina capacity of 95.92 million tons by the end of 2022. Antaike estimated that approximately 54% of the alumina were refined from imported bauxite. Their projections indicated that 9.2 million tons of additional capacity was introduced in 2022, with a further 3.8 million tons to be added in 2023, all relying on imported bauxite. Since 2017, the utilization of domestic bauxite in China has been declining, while the consumption of imported bauxite has continued to rise. This trend suggests that the dependence on imported bauxite will continue to grow throughout 2023.
Antaike has provided a forecast stating that in 2023, approximately 49 million tons of alumina will be produced in China using imported bauxite. This translates to bauxite demand of 137.5 million tons. In the initial five months of the year, China has already imported 60.6 million tons of bauxite, averaging around 12.1 million tons per month. To fulfil the required alumina production, an additional 76.9 million tons of bauxite (averaging around 11 million tons per month) will need to be imported.
However, as Guinea has entered its rainy season (May to October), it is expected that its exports will fall significantly in the third quarter. Consequently, China is likely to shift its imports from Guinea to Australia. While Capesize vessels account for approximately 90% of the total shipments from Guinea to China, they only represent 6-8% of shipments from Australia to China. The majority of Australian shipments are transported using Overpanamax and Panamax vessels. This shift in trade patterns may potentially weigh on Capesize freight rates.
Europe, and in particular Ireland, Spain, and Germany, contributed approximately 6% to the global alumina output in 2022. Their bauxite imports primarily originate from Guinea's Port Kamsar and Conakry terminals, with additional minor sources from Guyana, Brazil, and Ghana. Historically, more than 60% of Europe's bauxite intake was transported by Panamaxes. Meanwhile, around 30% was carried by Supramaxes. Last year, the surge in energy prices resulted in the forced shutdown of several aluminium smelters, thereby leading to a sharp decline in alumina production.
In March, the European Commission introduced a draft law known as the Critical Raw Materials Act (CRMA) aimed at ensuring secure and sustainable supply chains within the EU. Led by France and Germany, the EU has actively advocated for the inclusion of bauxite, alumina, and aluminium in the strategic raw materials list under the CRMA. If this proposal is accepted, the industry would benefit from expedited permit procedures and extended access to financing, thereby accelerating the expansion ofaluminium smelters and bauxite miners in the future. Consequently, in the long term, it is highly probable that the EU will increase its bauxite imports.
India possesses abundant bauxite resources and ranked sixth in global bauxite output in 2022. However, due to the limited availability of metallurgical grade bauxite, and amid the substantial growth of the aluminium industry, India has significantly increased bauxite imports in recent years, particularly from Guinea. It is anticipated that the National Aluminium Company (Nalco) will inaugurate a new alumina refinery in Damanjodi with an annual capacity of 1 million tons by end-2024. Additionally, Vedanta is expected to commence operations of a 3 million tons per annum (MTPA) alumina plant in at some point across 2024-25. These developments are expected to support India's bauxite imports and cater to the growing demands of the industry.
In summary, this year, global growth in alumina production is expected to be driven by China, which is anticipated to increase output from 79.76 million tons to 82.2 million tons. It is estimated that China's alumina production from imported bauxite will rise by 5 million tons, leading to a 14-million-ton increase in bauxite imports (approximately 2.1 to 2.7 tons of bauxite is required to produce one ton of alumina). Looking ahead, China’s aluminium capacity is projected to hit 45 MTPA by 2026. This corresponds to demand for 90 million tons of alumina, which can be fulfilled by existing capacity. Therefore, we do not project a further considerable rise in alumina production capacity by 2026.
Following Indonesia's ban on bauxite exports, Guinea and Australia are projected to become the top suppliers to fill the gap in China's bauxite intake, with a combined volume of approximately 17-19 million tons per year. However, Guinea's exports are expected to be limited during the third quarter due to adverse weather conditions. Once the rainy season ends, Guinea is likely to rapidly ramp up its exports to China in the fourth quarter. The average voyage duration from Guinea to China is approximately 47 days, whereas the journey from Indonesia to China takes around 12 days. The change in trade routes has already resulted in a notable rise in the tondays of bauxite voyages, which rose by 14.6% y-o-y across January to May. The proportion of bauxite in total Capesize tondays has grown from 9% in the first five months of 2021 to 15% in the same period of 2023. All told, while Guinea’s bauxite exports can potentially provide some support to Capesize front-haul rates, seaborne iron ore remains the dominant factor influencing these rates.