BFA Prices Tick Up On China’s Supply Squeeze

The restrictions put in place in refractory minerals producing areas in China have taken yet another toll on local supply as customers struggle to secure the volumes the need.

Prices for brown fused alumina (BFA) were edging upward on Friday December 1 with availability constraints in China intensifying after the latest government-led shutdowns of facilities in key producing regions.

As provincial governments in areas of China including Henan push through with another round of stoppages to some industrial operations – this one, which started in mid-November, is due to last until March – the availability of bauxite for BFA production has collapsed.

"With the bauxite kilns shut, there are no raw materials for BFA," one supplier said.

"They knew the measure was [imminent], so companies could get ready somehow. But production has drastically dropped," he added.

"Bauxite output was already short, and is getting even shorter. This creates a struggle between BFA producers and bauxite sellers, as each of them tries to source enough volumes," a distributor added.

The latest production stoppage has led to further upward pressure on prices for BFA, after some weeks of firmness.

Industrial Minerals is currently tracking the price of brown fused alumina, refractory grade, at $750-800 per tonne fob China, compared with $750-770 per tonne in previous weeks.

The price of abrasive-grade brown fused alumina (FEPA F8-220) is also appreciating, with the material now assessed at $810-850 per tonne fob China.

The price of the commodity has been on the rise since July, when widespread inspections and new environmental norms put a squeeze on local outputs in the main refractories-producing areas of China.

Additionally, lead times from China into Europe have been getting longer.

"Customers are desperate to book volumes," one supplier said. "Sellers, on the other hand, want to wait, or at least hold until they get the price they want."

One large European buyer added: "We are trying to secure long-term agreements, but so far we haven’t had any success in that. No one wants to commit beyond one or two quarters."

Some market participants reckon – or hope, for want of a better word – that the tightness may ease somewhat after the Chinese New Year holiday, in the second quarter of 2018.

The understanding is that companies would be able to go back to business by then, although Chinese authorities have so far been scant on details.

Additionally, some state-owned suppliers of dynamite and equipment, now currently shut, would start supplying local companies again. Industrial Minerals has been hearing about this for some time now although, again, precise details remain unclear.