China and the United States compete for bauxite (aluminum ore)

Chinese and American companies are leading the global craze for bauxite (aluminum ore).

In the South American country of Suriname, Chinese state-owned mining company and metals producer Chinalco has laid claim to neglected bauxite deposits in the west of the country.

In Australia, major US aluminum producer Alcoa is planning to restart bauxite mining in an area abandoned a decade ago.

Driving the recovery is a squeeze on supplies of bauxite and alumina, an intermediate product used to make aluminum.

Reduced bauxite mining in the African country of Guinea, the world's largest bauxite exporter, as well as in Australia, Brazil and China, has caused Guinea's ore prices to rise by 50% in the past two years, reaching US$75/ton, while Australian prices have increased by 60%. Reaching US$55/ton.

Alumina and aluminum prices have also increased by 140% in the past 12 months due to supply disruptions and Australian refinery closures, with alumina prices rising by 140%.

Australian squeeze

The squeeze began late last year, when Alcoa shut a 50-year-old alumina refinery in Kwinana on the West Coast. Subsequently, the world's largest alumina refinery operated by Rio Tinto Group near Gladstone, Queensland, was temporarily closed.

The events have contributed to a strong alumina market, which in turn has pushed up aluminum prices and forced some metals smelters to cut output, including Rusal, Russia's largest aluminum company, which cut its annual target by 250,000 tons of metal.

The bauxite/alumina/electrolytic aluminum industry is a complex target for investors, but rising prices across the industry have been good for Alcoa, with its shares up 64% in the past two months and trading at $46.42.

At the small end of the market where a handful of mining giants exist, one Australian company has delivered a huge win for its shareholders.

Metro Mining, which produces bauxite in Cape York, Queensland, has seen its share price rise 215 per cent in the past 12 months, despite valuing the company at 6.3 cents at A$356 million.

Investment bank Morgan Stanley said it expects alumina pressure to ease in the first or second quarter of next year.

“Alumina supply has lagged aluminum since 2022, with Europe and Australia posting losses,” Morgan Stanley said.

“Historically, China has used excess capacity to balance the market. However, China's bauxite output has fallen by 8 million tons so far this year, and although bauxite imports have increased by more than 14 million tons, inland refineries have struggled difficult.

“Events this year have highlighted the fragility of the system and risks remain, particularly as China’s new production capacity will rely heavily on Guinea’s bauxite, meaning any disruption is likely to be felt quickly.”