Aluminium cos to gain from bauxite price slump

Aluminium companies are likely to get a breather in the form of falling bauxite prices driven by the demand slump from China, says experts.

Bauxite, which is the key raw material to produce aluminium, is usually exported from Gujarat to West Asia and China. However, recent slowdown in China and falling metal prices including aluminium, has led to a fall in imports from the major consumer, China.

“We came to know that export of bauxite from Gujarat has stopped in recent months as Chinese importers are cancelling their orders. This will help the domestic producers with cheaper bauxite ore,” a top official of Vedanta Aluminium told PTI.

He also said due to Chinese buying of bauxite in higher prices from the country, the raw material prices have not dipped despite falling aluminium prices.

“There was a mismatch between aluminium and bauxite ore prices as China was paying higher price for ore from our country. With lesser demand from China, we hope bauxite ore prices will come down,” the official said.

Chinese import of bauxite from the country stands at around 5 lakh tonne a month with an average price of $45—50 per tonne.

Despite fall in aluminium prices to around $1,720 a tonne from the high level of $2,400 a tonne seen in 2008—09, bauxite prices have not dipped due to building up inventory by China to feed its aluminium units.

On this, an analyst from a brokerage firm said falling Chinese demand will help aluminium producers like Vedanta and Hindalco, even to some extent the state—run Nalco.

“Falling raw material prices will translate into lesser cost of production. And less manufacturing cost will help domestic producers in an environment when the prices of the metal is subdued in the international market,” he said.