Tag Archives: Hongqiao
A quick look at China’s import statistics for bauxite reveals how seriously at least one company is taking the looming deadline for Indonesian ore exports.
Shandong’s Hongqiao, a publicly listed company, has purchased 10.5 million tonnes of bauxite to the end of June this year. Given that they produce only 2 million tonnes of aluminium (growing to 2.7 mt when their 600KA line comes up to speed), that means they are buying at roughly double their actual requirement. Indonesian bauxite has a yield factor of only about 20% aluminium.
Clearly Hongqiao is expecting turbulence in their supply arrangements. Hongqiao is almost totally reliant on Indonesian bauxite, though they have purchased Australian and other material in the past. It has been reported elsewhere that Hongqiao is presently negotiating with the Indonesian government for relief from the 50% tax and the export quotas, which are due to come into effect in January.
The thing that strikes me is that a stockpile of bauxite of the size that Hongqiao appear to be building will be quite a sight. We understand from our sources that the strategy is to have 12 months supply in place by the end of this year. Using the same calculations, that means that they will need to find somewhere to put 10 million tonnes of red dirt. If my calculations are correct, loose packed bauxite would require storage of 1.2 tonnes per cubic metre, so about .83 cubic metres per tonne, or 8.3 million cubic metres.
That is roughly 3,3oo Olympic size swimming pools.
Perhaps the Great Wall of China cannot be seen from space after all, but surely this much red dirt will be visible.
An announcement from Indonesia today represents another step towards Chinese alumina producers matching their words with actions.
Indonesia has been warning exporters of base metals ores such as bauxite and nickel ore, that come 2014, only those exporters who have built value-add capacity in that country will get export licences.
A number of Chinese companies have made noises in the last 12 months about being committed to investing in Indonesia, but today, Shandong Hongqiao group have announced a joint venture with an Indonesian conglomerate for the construction of a refinery in West Kalimantan, Indonesia.
According to the announcement, the project will cost $500 million and will create 2000 jobs. The plant will have a maximum capacity of 2 million tonnes, coming on stream in stages. Initial work will commence in the next month.
China does not need alumina capacity in the near term, and the Chinese preference would be to put any new capacity on their own soil. As it is, Hongqiao has extensive alumina capacity, though it will need more of the white powder once their new 600ka line comes on stream next year.
If it really does start construction work (which could mean engineers and draftsmen, not construction) in the next month, that would make a significant step towards the Chinese acquiescing to Indonesian demands.
Another outcome from the announcement last week about Beijing’s call for restrictions on new aluminium smelters is the rush to IPO for some.
We understand that Hong Qiao, owners of the Shandong Weiqiao smelter, are rushing to revive their listing application. Readers may recall that Hong Qiao started the listing process back in January, but cancelled the IPO after just two days of investor marketing.
We can’t comment on the strengths or otherwise of this particular share offering, but if you are looking for wealth opportunities in Chinese aluminium, don’t bank on last week’s NDRC/MIIT announcement as a catalyst for new investment, despite what some prospectuses (prospecti?) might say.