New alumina inferred index reflects Indonesia’s growing global significance

The launch of this index, and two others, for Vietnam and India, followed a consultation period which ended on August 13.

The initial daily calculation of the alumina index, inferred, fob Indonesia was $507.66 per tonne on September 2, while the underlying daily benchmark alumina index, fob Australia was calculated at $515.66 per tonne on the same day.

The Indonesia index was launched alongside the alumina index, inferred, fob Vietnam and the alumina index, inferred, fob India which were calculated for the first time on Monday at $502.66 per tonne and $499.66 per tonne respectively.

Indonesia’s ample reserves of bauxite, plus recent strength in its alumina refining capacity, has established the country as an area of strategic importance across the aluminium value chain.

“Despite the current challenges of bringing more planned alumina refineries online, Indonesia looks set to transform itself into a key market participant in supplying both bauxite and alumina when traditional sources struggle,” Fastmarkets analyst Andy Farida said.

“Economic co-operation between China and Indonesia remains robust following the 2024 Indonesia election,” he added. “And even though there is a ‘changing of the guard’ [in government], business continuation and raw materials focus are largely undisturbed.

“Fastmarkets’ latest offering of an FOB Indonesia inferred index will help to capture the growing market for many years to come,” he said.

Successes, failures of Indonesia’s bauxite export ban

According to the 2023 US Geological Survey, Indonesia has resources of 1 billion tonnes of bauxite across the country, but it only produced 20 million tonnes in 2023.

Indonesia is the world’s sixth-largest producer of bauxite, despite exploiting only 2% of its natural reserves in 2023. Indeed, Fastmarkets analysts believe that Indonesia is using only half of its estimated 40 million tonnes per year of bauxite production infrastructure.

This surplus is largely due to the country’s capacity for bauxite production fast outrunning the pace of its alumina refining.

As a result, trade sources have recently told Fastmarkets that Indonesia’s bauxite export ban may be eased in the foreseeable future because the country is unable to consume its own domestic supply, while China’s appetite for Indonesian ore grows.

China currently relies on Guinea for the majority of its bauxite imports, with the West African country accounting for more than half of China’s 125.66 million tpy of bauxite imports.

Fastmarkets’ latest monthly price assessment for bauxite, cif China, was $73-76 per dry metric tonne (dmt) on August 15. This was unchanged from the previous month, but up slightly from $70-75 per dmt on May 16.

Around 4-5 tonnes of bauxite is consumed to make 2 tonnes of alumina. This means that Indonesia’s domestic alumina operations would need to produce more than 20 million tpy to make the most of its internal bauxite capacity.

But this is not to say that alumina production has not grown substantially, alongside the bauxite export ban – it has.

Is Indonesia the antidote to Australian alumina woes?

According to Fastmarkets research, Indonesia’s alumina refining activity increased by 162% to 3.9 million tonnes in 2023, compared with 1.4 million tonnes in 2021, when the export ban was imposed.

Analysts forecast that if all the expansion projects were to go to plan, the country’s output of refined alumina would reach 10 million tpy in 2025 or 2026.

In light of this, the bauxite export ban has allowed Indonesia to funnel resources into its domestic aluminium value chain with considerable success.

One industry source told Fastmarkets that Indonesia would be “shooting itself in the foot” if it were to relax the ban, especially because the earlier nickel export ban brought considerable benefits.

Whether the bauxite ban will be eased has yet to be seen, but what seems certain is that the increase in Indonesian supply has come at a time of supply pressure in alumina’s historic heartland – Australia.

In 2024, Australia’s production of alumina has become fraught as a result of a variety of issues at a number of refineries.

In January, global aluminium producer Alcoa announced that it would fully curtail operations at its 2.2 million tpy Kwinana Alumina Refinery. This was finalized in June, with no fresh tonnages coming out of the defunct Western Australian powerhouse since then.

This followed a declaration of force majeure by Rio Tinto in Queensland, due to reduced access to gas following a leak in a natural gas pipeline.

The force majeure continues to the current date, despite rumors that it may be relaxed after a recent uptick in the numbers of Gladstone alumina units traded on the spot market.

Meanwhile, South32 recently announced that its Worsley operations in Western Australia were becoming untenable due to stringent environmental controls. Similar restrictions have plagued Alcoa in the region.

Because of the increased problems in Australia, Indonesia – which has competitive prices, a desirable location nearer China, and strong production – has risen to become a significant market participant in the global alumina spot market.

Market participants and industry experts will be eager to discuss these issues and more at the Indonesian Critical Metals and Minerals Summit in Bali on September 5-6.

The post New alumina inferred index reflects Indonesia’s growing global significance appeared first on Fastmarkets.