By Kunal Bose
India presents a unique case for bauxite. Though not as enormously large as they are in Guinea and Australia, bauxite resources (reserves plus deposits underneath to be explored) in India are big enough to sustain a large aluminium value chain. In fact, if anything unlike the official policy of Guinea and Australia, Indian authorities discourage exports of bauxite for value addition going up to high value aluminium products. According to the most recent alumina survey by Indian Bureau of Mines, India has 3.931bn tonnes of metallurgical grade bauxite resources with major concentration in the east coast states of Orissa and Andhra Pradesh. Deposits are also found in Gujarat, Jharkhand, Madhya Pradesh and Maharashtra. About 84% of bauxite mined in the country contains 40% to 45% AI2 O3. Besides medium to high grade bauxite going into the making of alumina, India has low-grade non-metallurgical deposits mined mostly in Gujarat and Maharashtra, mainly for exports.
Of the three aluminium groups in India, Hindalco and the largely government owned National Aluminium Company have their own mines holding high quality bauxite supplying all the ore that their refineries require. On the other hand, Vedanta Aluminium, the country’s largest in terms of alumina and metal capacity, will remain largely dependent on bauxite procurement from external sources, including imports till all the hurdles, specially opposition from local tribals and civic society, are overcome in opening the Sijimali bauxite block in Orissa’s Rayagada and Kalihandi districts holding estimated deposits of 311m tonnes.
In 2023, India had a share of 22.832m tonnes in world bauxite production of around 400m tonnes. Till such time, Vedanta start producing enough bauxite from deposits won at auctions early last year, it will be requiring significant volumes of imported raw materials to feed its alumina refinery at Lanjigarh in Odisha whose capacity has been expanded to 3.5m tonnes. India’s imports of bauxite were up from 3.009m tonnes in 2022 to 3.596m tonnes last year.
In the meantime, prices at which bauxite and alumina are traded are leaving producers with comfortable margins. Australian and Indian industries being among the world’s lowest cost producers of alumina are doing particularly well in present times. The global alumina production of alumina in 2023 at 141.924m tonnes shows a marginal fall from the 142.23m tonnes in 2022. This happened because of low capacity use in the first half of last year. But the second half saw production rising 5.2% to 72.699m tonnes from 69.225m tonnes in the first six months of 2023. China, which by now has achieved completed alumina capacity of 103.35m tonnes, stayed at the top of 2023 producers’ table with 82.38m tonnes followed by Australia 19m tonnes, Brazil 10m tonnes, India 7.3m tonnes, Russia 2.4m tonnes, UAE 2.3m tonne, Saudi Arabia 1.8m tonnes, Canada 1.6m tonnes, Jamaica 1.5m tonnes, Vietnam 1.4m tonnes, Kazakhstan 1.3m tonnes, Indonesia 1.2m tonnes, etcetera.
Considering the potential of India to convert resources into reserves through exploration backed by a right policy package, the country should see action by way of major alumina capacity addition. In this, all the three Indian primary aluminium groups – Hindalco, Vedanta Aluminium and Nalco – are participating. Nalco is in an advanced stage of implementation of the 1m tonne capacity fifth stream alongside its 2.1m tonne refinery in Orissa’s Koraput district using improved medium pressure digestion technology of Rio Tinto Alcan, says company chairman Sridhar Patra.
With alumina production of 2.124m tonnes in 2023-24, Nalco had an exportable surplus of well over 1m tonnes of the material. Expectedly, once the new 1m tonne capacity is commissioned, Nalco’s exportable alumina surplus will virtually be doubled. The company, which is among the world’s more cost-efficient makers of alumina, owns high quality bauxite reserves in the hills of Panchpatmali and Pottangi. In October 2023 in a pathbreaking development, Hindalco signed a long-term bauxite supply agreement with the government owned Orissa Mining Corporation in order to build a 2m tonne refinery at Kanshariguda in Orissa’s Raygada district with a cogeneration 150 MW thermal power unit.
The project will need investment of close to $1bn. Incidentally, the company is successfully running a 2.12m tonne refinery in the same district drawing bauxite from its own mine at Baphlimali hill. In its quest for vertically integrated operation from bauxite mining to metal smelting, Vedanta recently completed refining capacity expansion by 1.5m tonnes to make a total of 3.5m tonnes at Lanjigarh alumina complex. The group as it is targeting aluminium smelting capacity of 3m tonnes from about 2.4m tonnes now will further increase alumina capacity to 6m tonnes to be self-reliant in smelter feedstock. Interestingly, all the major aluminium related actions are in the country’s eastern coastal state of Orissa.
A research report says, the global market valuation of alumina market will rise by a CAGR of 3.7% to $61.1bn in 2030 from $45.7bn in 2023. In this smelter segment will grow by a CAGR of 3.8% to $52.7bn while the chemical segment will record a CAGR of 2.7%. Recent periods have seen disruptions in supply of bauxite and also alumina causing concerns for the white metal makers worldwide. First, the December explosion at an oil terminal in Guinea’s capital Conakry raised concerns about bauxite supply to Chinese refineries triggering a rally in prices of bauxite, alumina and the metal. More recently, alumina shortages occurred due to disruptions in Rio Tinto’s Australian shipments and falling Chinese supplies.
How well metallurgical grade bauxite and alumina (in terms of demand and prices) will do will depend upon the health of the global aluminium industry, particularly China because of its enormous industry profile. Aluminium capacity and production have become more and more concentrated in China, rest of Asia and the Middle East in the wake of smelter operation becoming increasingly challenging in the European Union and the US on account of high energy and labour costs.
Steady decline in production in the EU has resulted in domestic aluminium output meeting just about 11% of its demand. In January, the closure of Magnitude 7 Metals smelter (capacity 785,000 tonnes) in the Marston, Missouri because of the combination of high energy cost and difficult business condition has left the US with four primary aluminium smelters – one Alcoa smelter each in Massena, New York and in Warrick, Indiana and Century Aluminium ones in Mt. Holly, South Carolina and Seebree, Kentucky.
The US, which through 2000 was a top producer of the metal made only 785,000 tonnes in 2023. We have it from Congressional Research Service that at its peak in 1980, the US production was 5.1m tonnes. Now with a share of around 1% of global production, the country had to import 4.8m tonnes in 2023 for domestic use. With the closure of Magnitude, the run rate of the US industry will fall to a new historic low this year. In the meantime, the world aluminium production in 2023 rose to 70.593m tonnes from 69.038m tonnes in 2022. However, production growth rate last year was down to 2.25% from the earlier year’s 3%. Take China where the annual production growth rate continued to slow down as capacity had come close to government-imposed ceiling of 45.43m tonnes. Chinese production growth shrank to 3.7% in 2023 from 4% in 2021 and 2022.
Some research agencies suggest that the country’s aluminium output will be up by a little over 1m tonnes or 2.5% to 42.7m tonnes in 2024 from 41.59m tonnes in 2023, aided by start up of new capacity mainly in the northern Inner Mongolia region. Improvement in power supply in earlier drought hit Yunnan province and demand rises from the green sector that particularly includes renewable energy and electric and hybrid vehicles enabled the industry to make 17.84m tonnes of primary metal in the first five months of 2024 up to May.
Even while it had a 59% share of 2023 global aluminium production, China’s imports of 1.543m tonnes that year were close to 2021 record buying of 1.579m tonnes of foreign origin metal. Net imports during 2023 jumped by 195.1% to 1.393m tonnes after exports fell 23.4% over the previous year to 150,000 tonnes. Whatever be the capacity and production, global prices are a big influencer of imports and exports. So also political relationships have a bearing on a nation’s foreign trade. As Russia faced punitive Western sanctions, it had to target China for disposal of a major portion of its export surpluses like energy at some discounted prices. No wonder then, Russian aluminium alone accounted for 76% of Chinese imports in 2023. The other two major exporters to Russia were India and Iran with a share of 6.4% and 3.9%, respectively.
The Chinese demand grew 3.9% last year to 42.5m tonnes helped by growing application of the white metal in solar photovoltaic panels and both in electric and conventional vehicles. House building sector, however, continues to be a damper. In contrast ex-China demand shrank 3.5% in the face of weaknesses prevailing in the US and Europe. In the projected growth of world aluminium demand by 33.3m tonnes from 86.2m tonnes in 2020 to 119.5m tonnes in 2030, around 33% is to be on China account, while the rest of Asia will account for 26%, North America 15% and Europe 14%, says a research report adding that the highest growth rate is to materialise in transportation sector followed by electrical and construction sectors.(IPA Service)
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