2008 bauxite prices to soar says India

Bauxite prices may gain 30% next year on the back of rising demand in China and dwindling Indonesian exports. Prices may rise as high as $65/t, including insurance and freight, Chetan Shah, managing director of Ashapura Minechem Ltd., India's largest exporter of bauxite, said in a telephone interview yesterday in Mumbai. Prices rose 28% in 2006 and 12% so far this year, he said. China, which imports 70% of its bauxite requirements from Indonesia, faces a supply crunch after the Southeast Asian nation closed several mines to stamp out illegal mining. Reduced supply may curb Chinese alumina output and lift global aluminum prices. Bauxite is the raw material for alumina, a white powder used to make aluminum. "Since China's demand for aluminum is not showing signs of slowing, we expect bauxite prices to remain bullish," said Shah. Ashapura exports its entire 8 million tons a year output, mainly to China, Shah said. "Indonesia is key to China's aluminum production and the government closing several mines is bad news for China," Jim Lennon, an analyst at Macquarie Bank Ltd., said in an interview yesterday from London. The price of aluminum, used to make aircraft and beverage cans, has doubled in the past five years on growing demand from China, the world's biggest user of the metal. The South Asian nation may surpass Australia this year as the world's biggest alumina producer to meet a 25% growth in aluminum demand. Chinese Imports China imported 12.5 Mt of bauxite in the first seven months of this year, of which 8.81 Mt came from Indonesia, Macquarie Bank said in a report last month, citing Chinese customs data. The country is set to produce 20 Mt of alumina this year, the report said. "Imports of bauxite will be crucial if China is to maintain current production, let alone achieve the 29 million tons target next year," Lennon said in the September report. Ashapura's shares rose as much as 3% to 487 rupees on the Bombay Stock Exchange. The stock has more than doubled this year, valuing the company at $480 million.