September 18, 2012 (Chinavestor) Market overview: China is not rich in bauxite ore resource. China’s overall bauxite ore exploration only accounts for less than 10% of global total. In addition, most of domestic bauxite resources contain low-content ratio. With rapid growth of economic development, China has been importing large amounts of bauxite for the past 10 years.
Because large domestic bauxite demands, China is not expected to export bauxite in recent years. In contrast, bauxite imports have grown rapidly since 2002. As shown in the diagram below, the imports/demand ratio keep growing from 2002 to 2007, then reach a peak in 2008, with over half of domestic demand satisfied by import. However, because of global financial crisis, bauxite price dropped from $63.80 per ton in 2008 to $35.70 per ton in 2009. This caused a decline of import value from 2008 to 2009. After the 2009, imports/demand ratio becomes relative steady, and expected grow back to around 39.3% in 2012.
The major exporters to China are Indonesia, Australia, and India with market share of 74.4%, 24%, 1.4% respectively. Other minor suppliers included India, Malaysia, Germany, Japan and the Netherlands. China will continue to import a large amount of bauxite from these countries in the future due to China's strong economic performance and relatively poor domestic bauxite quality.
The world aluminum market has been highly volatile in the past years. The fluctuations in aluminum market reflected in aluminum ore mining industry. After a significant growth of 96.4% in 2008, industry revenue dropped by 3.2% in 2009, mainly because dropped aluminum price. With the recovering of aluminum market, industry revenue grew 40% in 20010 and around 25% in 2011.
The aluminum ore mining industry is a capital intensive industry. The largest cost in this industry is purchases costs, which includes purchase cost of mine, cost of obtaining mining rights, and cost of mining equipment purchase. Another important cost for mining industry is depreciation, which includes depreciation on buildings, vehicles, transmission equipment and power generation tec. Depreciation costs consist of about 7.3% of this industry’s overall costs. The third largest cost is utility costs, which includes cost for electricity and water. It accounts for around 3.5% of industry revenue due to the high energy consumption nature of mining industry. Other major costs include tax and interest, wages, rent, management and administration, research and development etc.