In 2024, China, as the commanding player in the global seaborne bauxite market, accounting for 85% of global bauxite trade volume, continued to see its imports grow strongly. According to AXSMarine data, China's bauxite seaborne imports (across all parcel sizes) increased by 12.6% year-on-year in 2024, reaching 171.6 million tons. Capesize (>160,000 Dwt) vessels, are the main beneficiaries, transporting 75% of China's bauxite imports, thus playing an increasingly vital role in both the Chinese and Atlantic Capesize markets.
As previously discussed under its "Cornerstone Plan"(Issue 148, 10 January 2025), China is actively promoting domestic iron ore production. However, the landscape is radically different in the bauxite arena and China is, and will be, dependent on overseas supplies for the foreseeable future.
On the cargo availability side, China's domestic bauxite production has been under sustained pressure, contrasting sharply with steadily rising imports. This is mainly due to limited domestic bauxite reserves and increasingly stringent environmental policies. According to the 2024 China Mineral Resources Report released by the Ministry of Natural Resources, China's static recoverable bauxite reserves stood at 707.52 million tons at end-2023. Accounting for the estimated annual output of 63 million tons in 2024, reserves may only last for around 11 years. This compares with domestic iron ore reserves which amount to 16 billion tons and are projected to last for another 15 years. Against this backdrop, this year, domestic bauxite production is forecast to remain flat at around 63 million tons.
Infrastructure improvements in West Africa, led by Guinea and including Ivory Coast, Sierra Leone, and Ghana, are expected to drive further increases in supply for the seaborne market, and especially supply for China. In contrast, as China's second-largest source of imports, Australia's bauxite exports are expected to decline slightly due to the resumption of its domestic alumina plants. Overall, Guinea and its West African partners’ exports to China are projected to increase by 20 million tons year-on-year in 2025, while shipments from Australia should decrease by around 2.5 million tons. There are rumors that other countries in West Africa regions may expand its export volume to China. If realized, this could offset the loss from Australia.
The importance of imported bauxite is evident in the breakdown of China's bauxite consumption. In 2024, imported bauxite is estimated to have accounted for around 73% of total consumption, up from 63% in 2023.
Demand Side: Alumina and Aluminum
Bauxite demand is reliant on the demand for alumina and aluminum, both of which are used in manufacturing industries. Last year saw a surge in alumina prices, leading to a huge drive to maximize the smelter capacity and source bauxite (as its raw material) around the world. This led to a huge increase in imported bauxite prices. Notably, according to BRS estimate, the current Guinea bauxite FOB is approximately $85/ton, compared to $40/ ton in the same period last year. This surge in prices reflects the situation where alumina producers, benefiting from ample production margins, are making every effort to purchase all available bauxite resources in order to maximize their returns. At the same time, this also means that once alumina production profits return to normal levels, some bauxite export trade will likely be canceled (the price drop will inevitably affect the export volume of some high-cost mines).
China's aluminum production has been steadily increasing over the past five years, maintaining an annual growth rate of over 3%. As of the end of November 2024, China’s built aluminum capacity was approximately 45.31 million tons, with operating capacity at 43.58 million tons, reflecting a capacity utilization rate of 96.18%, according to Mysteel.
However, production growth is likely to be capped going forward, as the government gives out production quota of 45 million tons for aluminum. Reflecting this, Chinese aluminum capacity utilization is expected to remain high in 2025. While alumina production and capacity are projected to increase, the alumina market is likely to shift from a tight balance to a modest surplus.
Digging deeper into the downstream market, several aluminum end-use demand trends merit attention since these will influence the bauxite market:
“New Three”: Similar to steel products, Beijing’s continuous promotion of the "New Three" (namely electric vehicles, lithium batteries, and solar panels) is also significantly boosting the demand for aluminum products. Photovoltaic production capacity will remain high, and domestic sales of electric vehicles will continue to benefit from policy support, thereby sustaining demand for aluminum products as major frame materials.
Real Estate: With the introduction of a series of supportive policies, the demand for aluminum products in China’s real estate market is expected to receive a boost. This also includes the real estate sector driving demand for household appliances, which indirectly supports aluminum demand.
Export: Effective 1 December 2024, export tax rebates for aluminum products will be removed, while the export tax rebate rate for aluminum products used in photovoltaics and batteries will be reduced from 13% to 9%. These measures will erode the economics of exporting. Although the scale of this impact remains unclear, this could cast a slight shadow over the otherwise positive future prospects of the aluminum market.
Despite certain challenges, the Capesize seaborne bauxite market stands in contrast to iron ore and coal markets which are currently under significant downward pressure. On the supply side, China’s continuous investments in mines in West African and related infrastructure are increasing bauxite production. On the demand side, aluminum products align well with China’s recent environmental and new energy policies.
All told, we project that China's seaborne bauxite import demand for Capesize vessels is projected to grow by 20 million tons year-on-year to 190-200 million tons in 2025. Considering the longer voyage distances, the bauxite market is expected to exert an increasing influence on the Capesize segment via heightened volatility in the fronthaul route.