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China’s aluminum industry could have trouble sourcing raw materials starting next year. On Wednesday, Indonesian President Joko Widodo announced that the country will ban bauxite exports starting in June 2023. Bauxite is the ore that is refined into alumina, and alumina is then converted into aluminum. Most of the country’s bauxite exports go to China. The export ban on bauxite is meant to help Indonesia’s domestic processing and refining industries, according to President Widodo. Based on USGS data, Indonesia is the world’s sixth-largest bauxite producer, responsible for approximately 4.6% of global production in 2021. (Source: Bloomberg, S&P Global) |
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AEGIS notes that Indonesia made a similar announcement in 2021 but did not follow through on banning bauxite exports in 2022. That said, LME aluminum rallied on this news, and could remain supportive if the Indonesian government stays true to its word. Aluminum end-users that are concerned about increasing prices could consider buying swaps or call options, as either would establish a maximum aluminum price. Such positions are standard for consumer hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (12/22/2022) |
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Note: Clients with AEGIS Platform access can see this and other research, plus hedge portfolio reporting and tools here. |
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AEGIS Insights |
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12/21/2022: Nickel Prices Rally While 2023 Supply Picture Remains Unclear 12/21/2022: AEGIS Factor Matrices: Most important variables affecting metals prices 12/14/2022: Could Peruvian Protests Affect Zinc Production or Prices? 12/07/2022: Does the Copper Rally Have Legs? 12/01/2022: What's Been Driving Aluminum Prices Lately? |
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| Important Headlines | ||
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12/21/2022: Indonesia confirms bauxite export ban to proceed as scheduled 12/20/2022: Who’s in the driver’s seat: U.S. steel and scrap dynamics 12/20/2022: USW approves new contract with US Steel 12/20/2022: US HRC: Prices rise, demand slows 12/20/2022: Column: Zinc stocks at historic lows after a year of smelter woes 12/19/2022: Tesla hits 3,000 cars a week in Berlin, Austin later than planned 12/19/2022: Norway's Hydro plans wind farm to power industrial plants 12/18/2022: China November aluminium imports fall amid rising domestic supply 12/16/2022: First Quantum mulling all legal options after Panama halts flagship mine |
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Important Disclosure: Indicative prices are provided for information purposes only, and do not represent a commitment from AEGIS Hedging Solutions LLC ("Aegis") to assist any client to transact at those prices, or at any price, in the future. Aegis makes no guarantee to the accuracy or completeness of such information. Aegis and/or its trading principals do not offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program. Certain information in this presentation may constitute forward-looking statements, which can be identified by the use of forward-looking terminology such as “edge,” “advantage,” “opportunity,” “believe” or other variations thereon or comparable terminology. Such statements are not guarantees of future performance or activities.
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