November 2021
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.