With aluminium production being the demand source for ~90% of alumina, and due to some difficulties with the hydrophilic powder’s long-term storage, the global market for smelter-grade alumina is generally in close balance.
This results in the price being highly responsive to market disruptions
and, despite alumina producers having slightly more production flexibility than
their smelting customers, a relatively cautious approach to new capacity
development. After failing to follow the surging aluminium price, global
alumina prices jumped recently due to the removal of just 1.5-2Mtpa of supply
when an explosion occurred in the Jamalco boilerhouse and production at Alumar
was partially constrained after a bauxite unloader failed.

The
surge in aluminium production capacity in China has had to be met with a
comparable increase in domestic alumina production capacity. The country is
assumed to have been moving towards domestic self-sufficiency. With declining
domestic bauxite quality and low freight rates, the country embarked on
significant capacity development along its Eastern seaboard with a view to
processing higher quality imported bauxites. Increasing freight rates—for a
low-value, high volume bulk product in bauxite—and increased focus on
decarbonisation may prompt a rethink of this strategy.
With
China’s current energy constraints, the continued build-out of refining capacity
in the country may be coming to an end. The country remains a net alumina
importer. Along with a desire to develop production capacity closer to bauxite
sources—to improve the value contained in increasingly expensive freight
cargoes—the energy supply constraints and consumption limitation policies in
China may see opportunities for capacity developments elsewhere preferred. As
seen with Chinese companies’ activities in the Indonesian nickel sector, it is possible
that the country will make significant direct investments in upstream processing
capacity in other countries in order to secure feedstock supply.

Outside
China, a number of new capacity projects have been taking shape. With a looming
export ban on raw bauxite in Indonesia, a number of developments have been
progressing. A number of capacity expansions are also being undertaken in
India. The proximity of these two countries to China will come as no surprise,
with capacity expansion in both countries largely exceeding the associated
smelter capacity development expected in the short term.
Indonesia
Indonesia
sits on significant bauxite reserves which, prior to export bans and
restrictions, saw the country become the largest bauxite source for China. With
an impending ban on the export of raw bauxite—slated for 2023, but with the
potential to be brought forward, as with nickel—refining capacity is being
developed in Indonesia, though not to the response level seen in the nickel
sector.
The
country’s only existing smelter-grade alumina refinery, the 1Mtpa Well Harvest
refinery in West Kalimantan, is having its capacity doubled to 2Mtpa, with the
expansion project expected to be brought into production by the end of the
year. Developed by a JV between local bauxite miner PT Cita Minerals, the world’s
largest aluminium producer, China Hongqiao, and shipping company Winning
Investment, Well Harvest only started operations in 2016.
Indonesia’s
second refinery, the 1Mtpa Bintan Alumina Indonesia (BAI), started production
just this year. Located in the Galang Batang Special Economic Zone of the Riau
Islands, the refinery is a JV between China’s Shandong Nanshan Aluminium,
Malaysia’s Press Metal and local bauxite miner PT Mahkota Karya Utama (MKU). Construction
has reportedly already commenced on a 1Mtpa expansion.
A
long-planned development at Mempawah in West Kalimantan, the 1Mtpa Borneo
Alumina Indonesia (BAI), is also under development, with construction starting
this year. Initially involving Chinese producer Chalco, the project is now being
undertaken by state-owned Antam and Inalum. It is expected to supply Inalum’s
Asahan smelter and underpin an expansion and potentially a greenfield smelter
development in North Kalimantan.
Two
of the country’s three refineries represent associations between Chinese
companies and upstream developments in Indonesia. The third is an essentially a
state-owned entity looking to secure supply for current and future Indonesian
smelting capacity. A number of other proposals, generally backed by a Chinese
interest, have also been proposed, but limited progress has been noted.
India
India’s
refining capacity is currently the fourth-largest in the world behind China, Australia,
and Brazil. Expansion of two of the largest refineries is currently underway—though
this will not move it up the rankings. Despite supply self-sufficiency, India
is an alumina exporter. The national producer, Nalco, refuses to sell material
to domestic competitors, forcing other companies—primarily Vedanta—to import
alumina, though this has been challenged through the courts.
All
three of the major players in India have capacity development plans, all at
sites located in the bauxite-rich Odisha state. India’s state-run PSU, Nalco,
is currently undertaking a 1Mtpa expansion of its flagship Damanjodi refinery
in Odisha. Hindalco is also expanding its main refining operation in Utkal. The
expansion is expected to increase the Utkal plant’s capacity by 500ktpa.
Hindalco has also submitted a proposal for a greenfield 2Mtpa plant at Rayagada.
Vedanta Resources also has big plans to increase its 2Mtpa Lanjigarh refinery
to a 5Mtpa operation in the medium term.
India
is also home to the 1.5Mtpa Anrak plant, also in Odisha state. The refinery’s
construction was completed in 2013, but it never completed commissioning as an
associated mining lease on its planned bauxite resources was revoked. More
recently, the company is reported to be progressing towards a start-up, but it
has been a long time coming.
The
Bauxite Motherlode
While
it is home to the largest bauxite reserves in the world, Guinea currently has a
very limited presence in the alumina refining space. Currently, the country’s
only refinery is the 640ktpa Fria operation owned by Rusal. The company had to
be essentially forced by the government to restart operations in 2018 after production
was curtailed in 2012.
The
granting of mining leases, as the country’s exports surged, has typically come
with a requirement for proponents to evaluate a refinery development. To date,
SMB is understood to have broken ground on a refinery associated with its
extensive bauxite capacity. Most likely to follow could be Chalco, leveraging
off its recently commenced Boffa bauxite mining operation.
For
companies looking to develop capacity near sources and increase the value of
shipping cargoes from the country, there is reasonable potential for further
capacity development in Guinea. However, it would be a challenging jurisdiction
in which to conduct such projects, which may be why they aren’t being
undertaken. The impact of the recent coup on potential investments to develop
refining capacity remains to be seen.
What
Else is Out There?
Outside
Asia and Guinea, development opportunities are limited. So where could
additional capacity come from, with the expected continued growth in demand for
aluminium?
A
number of refineries in Australia, currently the world’s second-largest
producer, have existing, but shelved, plans for potential expansions.
Debottlenecking and production creep will see some increases in production, but
major capacity step changes are unlikely to be realised in the short to medium
term.
In
the UAE, if not at EGA’s GAC project in Guinea, there is some potential for
expansion of the 2Mtpa Al-Taweelah, with a doubling of capacity mentioned to
further secure the company’s supply chain.
After
acquiring the Alpart refinery from Rusal in Jamaica, JISCO followed up with an
announcement of its intention to build a greenfield 2Mtpa operation in the country,
but little has been heard of the project since, and the company has not got
Alpart back online after curtailing it for a modernisation project.
In West Africa, in Ghana
and Cameroon, ambition exists for the development of a fully integrated
value-chain off these countries’ bauxite resources, but this is expected to
take a while if it eventuates.