Jun. 2, 2016 - Mining major Rio Tinto has projected a bullish scenario on bauxite demand as the aluminum making raw material will be buoyed by high demand from China.
Rio sees a 15-year bauxite boom in the making, which is spending $1.9 billion to raise output. It said China will need tons of bauxite for running its Aluminum smelters and alumina refineries.
The raw material bauxite is processed into alumina, which is an intermediate for making aluminum.
Global demand for aluminum is already growing and may outpace the 4 percent annual growth, according to a report.
The forecasts were made by Alf Barrios chief executive officer of the producer’s aluminum unit.
“China’s bauxite demand growth is forecast to be significant over the next 15 years, and it is something we are very keen to capture,” he said in the forecast published on its website.
According to him, all commodities, including aluminum will remain challenged in the short-term, but prices would pick up later this decade.
Barrios said: “In the medium to longer term, aluminum is one of the fastest-growing metals.”
Rio Tinto has already done the groundwork by making sizable investments in Bauxite mines of Australia. Its Amrun development on Queensland’s Cape York Peninsula was approved in 2015 and can produce 23 million metric tons from 2019 and its existing operation will be raising output by 10 million tons a year.
China has drastically increased the volume of Bauxite imports from 2.2 million tons to 50 million tons in the past decade after the quality and volume of domestic sources became inadequate.
It seems Australia will gain the most from the new demand as rival suppliers in Malaysia and Indonesia is haunted by curbs on raw material exports.
Australian bauxite exports may rise at an average of 36 percent per annum between fiscal 2018 and fiscal 2021, according to Australia’s Department of Industry, Innovation, and Science.
The Aluminum prices also improved 3.3 percent in 2016 after crashing 19 percent in 2015 at the London Metal Exchange.
According to Business Line, the increase in Aluminium price to $1,545 per ton is a result of the drop in global aluminum supply. Aluminum prices plunged 23 percent between May 2015 and Dec 2015, from $1,960 per ton to $1,500 per ton.
The supply from China fell from 4.78 million tons (MT) in December 2015 to 4.19 MT in February 2016. Chinese supplies are under pressure as China closed 4.27 MT of smelting capacity in the last six months.