Aluminum price soars as China cancels tax incentive on exports
The export tax rebate was also removed for copper and lowered for some refined oil, solar, battery and non-metallic mineral products.
Chinese alumina prices have jumped to a five-month high on news that at least two refineries in the province of Shanxi are being shut down pending environmental inspections.
So far the market impact seems localised.
Shanghai aluminium prices have risen on concerns about the potential knock-on effect on metal production in China. Alumina is the intermediate product derived from bauxite used to smelt aluminium.
But the price of alumina traded on the CME is unmoved, reflecting expectations that the giant Alunorte alumina refinery in Brazil is poised to receive official sign-off to return to full production after more than a year of operating at half capacity.
What links both the Alunorte outage and the latest events in China is aluminium’s dirty secret.
The metal touted for its environmental benefits, particularly in the manufacture of lighter cars and trucks, has a big problem with storing its toxic by-products.
With the world’s focus on tailings dams after the Brumadinho iron ore disaster in Brazil, aluminium has just received another reminder that it, too, has a tailings problem.
Most of the world’s refineries use the Bayer process to extract alumina from bauxite.
The waste product is red mud, a mix of un-dissolved alumina, iron oxide, silicon oxide, titanium oxide and multiple other metals in smaller quantities. It’s the iron oxide that gives the residue its distinctive red colour.
The most common way of dealing with red mud is storing it in tailings dams or ponds.
There is plenty of ongoing research into finding a commercial use for red mud, with several producers working on either extracting other minerals or at least rendering it less harmful
And there’s a lot of it around; more than 3 billion tonnes, according to the International Aluminium Institute (IAI), which describes red mud as “one of the largest industrial by-products in modern society”. (Bauxite residue management: Best Practice, July 2015).
A tonne of alumina on average generates about one-and-a-half tonnes of red mud, though the ratio varies depending on the type of bauxite processed.
Last year there were 160 million tonnes of residue produced. And as global alumina and aluminium capacity rises, the amount of residue will also rise to a forecast 250 million tonnes in 2030.
Red mud briefly grabbed the headlines in 2010, when a dam spill at the Ajka refinery in Hungary flooded the surrounding area, killing 10 people and leaving many more with caustic burns from the highly alkaline waste material. The plant was closed permanently.
And it’s red mud that roiled the alumina market last year and threatens to do so again.
The partial closure of the Alunorte refinery, the largest alumina plant in the world with annual capacity of 6.3 million tonnes, was down to concerns that red mud had spilled from a containment pond after heavy rain.
Hydro, the plant’s owner and operator, has consistently rejected those concerns and the authorities are slowly moving towards allowing a resumption of normal operations.
A Brazilian court has lifted one of two production embargoes on Alunorte, leaving the company hopeful that the second will be revoked imminently.
There may be an issue with getting approval for a new containment pond, but Alunorte still has 8-18 months of capacity in its existing residue disposal area.
Red mud is also what prompted the Chinese authorities to order the closure of Xinfa Group’s Jiaokou alumina refinery in Shanxi.
China’s state-run CCTV last week reported that the refinery, which has annual capacity of 2.8 million tonnes, had been dumping red mud in Xiaoyi city, contaminating the local river system and crops.
Environmental inspectors are due to inspect the plant and its tailing ponds, with the Ministry of Ecology and Environment (MEE) issuing a directive for other refineries to be checked.
At least one other local plant, operated by Huaqing Aluminium, has also been closed.
The full extent of the curtailments and their duration remains uncertain, meaning it is difficult to assess whether there will an impact on Chinese aluminium production.
However, the jump in the Chinese alumina price and rising Shanghai aluminium prices suggest there is genuine concern about potential supply-chain disruption.
Just to underline how much of a global issue red mud has become was the temporary closure last month of Hindalco’s Muri refinery in the Indian state of Jharkhand after what the company termed “an incident in the red mud (bauxite residue) storage area”.
There is plenty of ongoing research into finding a commercial use for red mud, with several producers working on either extracting other minerals or at least rendering it less harmful.
Rusal, which has been working on the problem for several years, announced in April a memorandum of understanding with Tiocomposite, a company operating under the auspices of the Nanotechnology Centre of the Republic of Tartarstan, to convert red mud to sulphur concrete.
The institute’s message is that even shiny recyclable aluminium ‘must justify its use of global resources’
Sulphur concrete is “an innovative construction material that can be used to produce pavement slabs, kerb stones, drain channel trays, gravel and other materials necessary for the implementation of infrastructural projects”, Rusal says.
The two companies will operate a pilot plant to process about 100,000 tonnes a year of dehydrated mud.
It would be an innovative solution to a growing problem for the global aluminium industry.
Without some form of technological breakthrough red mud will simply carry on accumulating in tailings dams and ponds with all the accompanying risks of seepage, contamination and possibly worse.
“Look out – we’re on the radar,” warned Ron Knapp, secretary general of the IAI, speaking at last month’s CRU aluminium conference in London.
“You don’t have to be in the iron ore business, you just need a dam,” he added, referring to what it takes to attract investor and regulatory scrutiny these days.
The IAI has published papers on both sustainable bauxite mining and bauxite residue management in an effort to standardise and improve the industry’s storage of red mud.
The institute’s message is that even shiny recyclable aluminium “must justify its use of global resources”.
To judge by the latest red mud scare in China, the sector’s required clean-up is still very much a work in progress.
(By Andy Home; Editing by David Goodman)
