supply trends and prospects for fused alumina

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Roskill

Supply trends and prospects for fused

alumina

Jessica Roberts

Roskill Information Services

Metal Bulletin/Industrial Minerals, 2nd Asian Bauxite & Alumina

30-31 October 2012, Marina Mandarin, Singapore


Roskill

The statements in this presentation represent the considered views of Roskill 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 Roskill 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 Roskill 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.

Disclaimer


Roskill

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

Summary

Bauxite & Alumina Asia 2012 – Jessica Roberts, Roskill


Roskill

Global metallurgical alumina output was

92.11Mt in 2011, led by China

China (37%)

Oceania (21%) East & Central Europe (5%)

West Europe (6%)

Africa & Asia (8%)

South America (16%)

North America (6%)

Source: International Aluminium Institute (IAI)



Roskill

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:

Calcined

(42%) Chemical

(58%)

Chemical grades:

Aluminium sulphate

Aluminium fluoride

Aluminium hydrate

Calcined grades:

White fused alumina (WFA)

Ceramics

Refractories

Tabular Source: Roskill Information Services, IAI



Roskill

Output of non-met. bauxite was 10.4Mt in 2011

Main non-met. (raw) grades:

Portland cement

Calcium aluminate cement

Slag adjusters (steel)

Main calcined grades:

Abrasives/BFA

Refractories

Proppants


Refractories

(26%)

Cement

(24%) Abrasives

(22%)

Chemicals (8%)

Proppants

(10%)

Slag adjusters

(9%)

Other

(1%)

Source: Roskill Information Services


Roskill

Fused alumina


Roskill

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)

What is fused alumina?


Courtesy: Treibacher Schleifmittel


Roskill

Brown fused

Average composition of

>94% Al2O3

Feedstock: abrasive-grade

calcined bauxite

Production: focused in

China (~85%)

Main markets: abrasives

and refractories

Market size: 1.5-1.7Mtpy

Fused alumina comprises two distinct products,

BFA and WFA, based on different feedstocks…


Courtesy: Orient Abrasives, India


Roskill

White fused

Higher purity grade (>99.5%

Al2O3)

Feedstock: low soda

calcined alumina

Wider regional spread in

output

Main markets: abrasives

and refractories

Market size: 550-580ktpy

Fused alumina comprises two distinct products,

BFA and WFA, based on different feedstocks


Courtesy: Treibacher Schleifmittel, Austria


Roskill

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

China is the world’s largest fused alumina

producer with 3.5-4Mtpy capacity



Roskill

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

Producers outside China are bigger enterprises

with greater geographical spread


Tend to have numerous production bases, including Chinese

(eg. Treibacher has subsidiaries in 9 countries)


Roskill

China dominates international trade, accounting

for nearly 70% of the total in 2011


Source: Global Trade Atlas, Roskill

Calcined

(42%) Chemical

(58%)

Exports Imports

41% 22%

68%

23%

24%

4%

4%

4%

4%


Roskill

China accounts for majority of exports…


0

20

40

60

80

100

120

0

100

200

300

400

500

600

700

800

900

Ex

po

rts

(0

00

t)

US

$/t

on

ne

Exports Price per tonne (China)

Chinese fused alumina exports and average unit price (2008-2012)

Source: Global Trade Atlas


Roskill

… but ROW prices are higher, reflecting higher

WFA/BFA ratio


0

5

10

15

20

25

30

35

40

45

50

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Ex

po

rts

(0

00

t)

US

$/t

on

ne

ROW exports (ex-China) ROW price per tonne (ex-China)

ROW fused alumina exports and average unit price (2008-2012)

Source: Global Trade Atlas


Roskill

Situation in China


Roskill

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: Roskill Information Services


Roskill

Main (non market-driven) factors affecting utilisation:

1. Government policies

2. Increased overall production costs

3. Competition from aluminium smelters

… and overcapacity is rife, with utilisation rates

less than 50% in 2011



Roskill

Banned inefficient smelting technology (furnace

transformers must be >3,000KVA)

Consolidation encouraged: closure of low-quality, low-

tech 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

1. Chinese government policies are affecting

BFA supply



Roskill

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 non-

met. grades

2. Increased production costs owing to raw

material quality/supply…



Roskill

Lower grades of bauxite require more energy for fusing

(average feedstock grade now 70% Al2O3, 5-15% SiO2)

Unreliable electricity supplies (brownouts and power

restrictions), especially from hydroelectric sources

Electricity restrictions in 2011-12 severely impacting

furnace operating rates (40% in Henan, 50% in Shanxi,

30% in Guizhou)

2. … and high energy costs



Roskill

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

3. Competition from aluminium smelters



Roskill

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

Fused alumina supply prospects: China



Roskill

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

Fused alumina supply prospects: rest of world



Roskill

Thank you!


Roskill

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supply trends and prospects for fused alumina

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