Analysis of Indonesian mining ban policy on alumina overseas disturbance series
July 25, 2024
The Indonesian government is considering easing the export ban on washed bauxite, but the quota is limited and is not expected to return to 2022 levels.
The domestic short-term contradiction is still in the resumption of domestic ore production or not, from the medium and long term perspective, it is still necessary to pay attention to the actual landing of Indonesia's bauxite loosening policy. Indonesia, as one of the world's major producers of bauxite, the relaxation of its export ban means that the supply of global bauxite market will increase, helping to alleviate the tight supply situation. The Indonesian government is discussing the possibility of relaxing the ban in the next few months, and it is expected that Indonesian bauxite will enter the Chinese market at the earliest in the fourth quarter. The medium and long term impact still needs to pay attention to the actual landing situation.
If the implementation can alleviate the logistics uncertainty caused by seasonal climate factors in China, ensure the stability and efficiency of the supply chain. The rainy season in Indonesia is from October to March each year, while the rainy season in Guinea is from May to October. If Indonesia relaits the export ban on bauxite, it can hedge the market's concern about the poor transportation of bauxite caused by the rainy season in Guinea, and ensure the stability and efficiency of the supply chain.
Indonesia is located in South Asia, far away from the Middle East and close to China, and the freight of bauxite from Indonesia to China is relatively low. For China, which is highly dependent on imports of bauxite, its advantages are reflected in the short transportation distance and low freight. From the CIF point of view, Indonesian bauxite is nearly lower than Guinea bauxite, but significantly higher than the bauxite in Australia and Malaysia.
Spot domestic prices are still strong, overseas prices have fallen recently, but the import loss is larger. Overall, the recent fundamentals of supply and demand have not reversed, and prices are volatile; In the long term, there is the possibility of supply recovery and the relaxation of Indonesia's mining ban policy, and the space above alumina may be compressed, but considering the uncertainty of expectations, it is necessary to pay attention to the risk of convergence of the monthly difference and the failure of expectations when the monthly difference is too large.
