Non-metallurgical alumina -- trends and issues
Although the non-metallurgical alumina industry is as small part of the overall consumption of
alumina it is a diverse sector with many applications and total consumption of about 7 million
tonnes in terms of alumina content. Feedstock for the alumina chemicals and specialty calcined or
fused alumina is alumina hydrate or calcined alumina from Bayer plants with the exception of some
of the very highest grades with 4N or 5N purity.
Feedstock grades
The basic grades of non-metallurgical alumina from Bayer plants are wet hydrate, dried hydrate and
normal calcined alumina. In addition, white or near white hydrates are supplied from some plants
and low soda grades of calcined alumina are supplied for more specialised applications. In some
cases, calcined grades are to all intents and purposes the same as metallurgical alumina, although
often specifications for non-metallurgical grades are more demanding. Because of that and because
the volumes are much smaller, prices are higher than those for standard metallurgical grades by
$30-40 per tonne. Low soda grades will be higher with grades under 0.2% Na20 of the order of $100120 per tonne higher and even lower soda grades below 0.1% considerably higher. Sales tend to be
on a contract basis, frequently for a year, although multi-year contracts are also fairly common.
Total production or rather sales of non-metallurgical grades of alumina reported as “chemical grade”
by the International Aluminium Institute amounted to 7.22 million tonnes in 2017, an increase of
almost 1 million tonnes over the previous year. It should be stressed that this is recorded sales, of
calcined alumina and alumina hydrate (reported as Al2O3 content), rather than production as total
production of alumina hydrate will be of the order of 200 million tonnes, much of which was
calcined to make 126 million tonnes of smelter grade alumina in 2017. Most of the increase in
chemical grade sales was recorded in China with increases also in Europe and Latin America but
declines in North America and declines in Asia other than China and Oceania. The increases in Latin
America reflect sales into the North American market, most notably for hydrate from Brazil, filling
the gap in supply left after the closure of Point Comfort and Corpus Christi plants in the USA.
While there may be some anomalies such as much lower sales than is realistic for Eastern and
central Europe, given Russian demand, the figures that are available from IAI still give a reasonable
approximation of the overall situation and the trends. After a significant fall in sales in the recession
year of 2009 sales of chemical grade alumina recovered quickly to levels above pre-recession levels
although they dipped again in 2012 and 2016. There was a significant increase in 2017 largely fuelled
by increases in China, but there has certainly been strong demand from applications in sectors such
as refractories, ceramics and flame retardants on a worldwide basis.
World Annual Production (Sales) "Chemical
Alumina"
8 000
7 000
6 000
5 000
4 000
3 000
2 000
1 000
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Trends in non-metallurgical applications for alumina
Non-metallurgical applications for alumina can be separated into those that use hydrates as the raw
material and those that use calcined alumina, although there are some instances where alumina
hydrate is purchased for calcination to specialty grades of alumina.
Alumina hydrate applications
Total usage of alumina hydrate is estimated to have been about 3.8 million tonnes in 2017 in terms
of alumina content, equivalent to about 5.85 million tonnes of gross weight.
The largest use is for the production of water treatment chemicals. Total use of alumina hydrate in
water treatment chemicals is estimated to be of the order of 1.75 million tonnes of alumina content
equivalent to about 2.7 million tonnes gross weight. The primary raw material for this is wet filter
cake from Bayer alumina plants.
Markets for grades used in water treatment chemicals tend to be regional because consumers are
looking for the alumina content and more than a third of the gross weight of wet hydrate is water of
crystallisation plus the free moisture content is normally about 5%. However, with the closure of two
Bayer plants in the USA, consumers turned to Brazil as a major source of raw material. Up until 2013,
Brazilian exports of alumina hydrate had primarily been to Japan but exports to the USA started in
that year rising to more than 74,000 tonnes in 2014. However, after the closure of Point Comfort
and Corpus Christi plants exports to the USA escalated rapidly and in 2017, overtook those to Japan
at a level of almost 380,000 tonnes in a year when exports to Japan fell from their 2016 peak of
443,000 tonnes.
Tonnes
Brazil Exports ATH
500 000
450 000
400 000
350 000
300 000
250 000
200 000
150 000
100 000
50 000
2011
2012
2013
USA
2014
2015
2016
2017
Japan
ALUMINA HYDRATE DEMAND
TOTAL 3.8 MILLION TONNES
Activated alumina
Zeolites
3%
7%
Others
10%
Water treatment
chemicals
46%
Flame Retardants
15%
Aluminium
fluoride
19%
The water treatment chemicals business is a mature one is developed nations with very modest
growth rates in line with population trends, possibly no more than 1-2% in the most developed
nations. There is greater potential for growth in developing nations but it is expected to be slow
from a relatively low base requiring major growth of water delivery infrastructure.
Bauxite is also used directly to manufacture these chemicals. All of the European producers now
produce exclusively from wet hydrate feedstock. There is still some bauxite used in the USA,
primarily low iron bauxites from Guyana, by a couple of producers and considerable amounts in
India and China using local raw materials.
Aluminium fluoride production is the second largest user of wet hydrate. In this case the situation at
Alunorte has not posed so much of a problem with supply as North America production is by
aluminium producers using hydrate from their own Bayer plant to produce with purchased fluorspar.
Essentially these producers are vertically integrated as they are also the customers for the
aluminium fluoride in their production of aluminium metal.
Growth in this sector has been strong in the last decade at over 5% CAGR on a worldwide basis
driven by growth of over 10% in China and more than doubling demand in that period. Demand will
depend on the growth in aluminium production with an almost direct relationship between the
volume of aluminium produced and aluminium fluoride demand, with minor reductions as more
efficient methods of production reduce aluminium fluoride requirements per tonne of aluminium.
Flame retardants is a fast growing sector with growth rates of 3-6% per annum depending on the
region. Current production is estimated to be 800-850,000 tonnes, which will have an alumina
content of 520-550,000 tonnes. It includes both white or near white Bayer hydrate and fine reprecipitated hydrates, with significant added value from the Bayer hydrate commonly used as the
raw material. The finished product is sold and used as the hydrate and at prices 2-3 times the cost of
wet hydrate for ground white Bayer more for fine precipitated grades with some special grades well
over $1,000 per tonne.
It is estimated that the total consumption of alumina hydrate in zeolites is probably less than
400,000 tonnes now representing 260,000 tonnes in terms of Al2O3 content. The market for zeolites
has declined from its peak because of the shift from powder detergents to liquid or gel detergents in
Europe and North America, although there are still large volumes of detergents used in Eastern
Europe and Asia. There are still important markets for zeolites in things like fluid cracking catalysts
and adsorbents or dessicants. Growth rates are expected to be relatively modest at perhaps 1-2%
per annum reversing declines over a number of years as the loss of detergent markets seems to have
matured.
Calcined alumina
There are a variety of used for calcined alumina feedstocks from Bayer plants, although in aggregate
the largest consuming sector is refractories. Total consumption of feedstock calcined alumina for the
production of specialty grades or derivatives is estimated to be about 3.2 million tonnes. Of that
about 2.2 million tonnes or close to 69% is used in refractory applications.
CALCINED ALUMINA DEMAND
TOTAL 3.2 MILLION TONNES
WFA Abrasives
8%
Catalysts
4%
Polishing
2%
Tabular
22%
WFA refractories
9%
Ceramics
17%
CAC
4%
ceramic fibres
4%
Spinel
3%
Calcined direct
use refractories
25%
Misc
2%
Direct use of calcined alumina in refractories is estimated for be of the order of 800,000 tonnes.
Tabular alumina is estimated to be around 700,000 tonnes, white fused alumina for refractory
applications 270,000 tonnes, with those two products often in direct competition. In the case of
calcium aluminate cements, calcined alumina is used in the production of 70-80% alumina grades,
almost exclusively used in refractories and the 120,000 tonnes of alumina used represents a total
CAC production of the order of 150-160,000 tonnes, with much of the production of those grades
concentrated in Europe. High alumina ceramic fibres, do have other uses outside of refractories but
the total consumption of alumina in included under the category of refractories, which is the
majority of the use.
The refractories markets were strong in 2017 after a stuttering recovery from the 2009 recession
when volumes dropped significantly. That strength has continued into 2018 and major companies
such as Vesuvius, RHI Magnesita, Imerys refractories division and Minteq all reporting strong sales
levels. Part of the increases in their sales has been due to escalating prices for some raw materials
filtering through to sales prices, but there have also been increases in volumes.
Despite issues concerning the imposition of 25% tariffs on imports to the USA the steel industry, by
far the largest consumer of refractories accounting for 60-70% of total consumption, has been a
strong and resilient market recently. Crude steel production, which is the best measure of demand
for refractories increased by 4.6% in 2017 on a worldwide basis there is a forecast for growth of
4.7% in 2018 from the July 2018 monthly report prepared by James King, independent steel industry
consultant. The growth has been widespread with few countries either stagnating or going down.
Total global growth for 2019 is predicted to fall to 1.6% but much of that due to a forecast of no
growth in China after 6.4% growth for 2018, because of the impact of trade restrictions on steel
consumers in China and adjustment from overproduction in 2018, although local demand for steel in
China is expected to remain fairly strong despite the impact of environmental restrictions. In
contrast 2019 is expected to be a strong growth year for European production, possibly over 5%.
Sanctions on steel imports into the USA appear to be having little effect on the overall market apart
from raising prices to a level where the 25% import duty is having no effect on the net price that
importers can achieve. Some idled steel capacity may come back on stream but in the short term
duties are expected to have little effect on US or world production, with few possible exceptions
such as Canada.
The ceramics sector, which covers everything from grinding balls to high tech ceramics is also a fast
growing part of the industry with growth in 2017 and 2018 as high as 4-5%, and other sectors such
as catalysts, polishing and white fused alumina for abrasives are expected to show growth, but
perhaps a little below that of current growth rates for refractories and ceramics.
Supply and Pricing Issues
Alunorte
The supply situation for alumina hydrate for both the USA and Japan changed dramatically in 2018.
Following heavy rains in Brazil, there were fears that the tailings dam at the Alunorte Bayer alumina
plant could overflow, which in the end it did not. However, the company was instructed by Brazilian
Environmental authorities to reduce production at its plant by 50% effective at the beginning of
March, resulting in the loss of about 3 million tonnes of alumina supply. Alunorte had been the main
exporter of hydrates from Brazil and it had a significant effect in supplies for both Japan and the
USA.
As a result of the problems in Brazil the largest importer in the USA, Southern Ionics declared force
majeur for its alumina hydrate based products. It had been informed by Hydro Aluminium, the
owner of the Alunorte plant that they were declaring force majeur effective 2nd March and would
only commit to supplying 50% of its contracted requirements to Southern Ionics and other
customers. However, Hydro did assist Southern Ionics to obtain further supplies on a monthly basis
by purchasing smelter grade alumina and swapping it for hydrate from other suppliers. Much of the
ATH requirements were achieved through those actions, but at higher prices. Initially it was hoped
that the Alunorte plant could return to normal operation after a brief period, but that has not been
the case. With no foreseeable prospect for the plant to return to full capacity, and because Hydro
asked Southern Ionics to reduce volumes in future planned shipments, Southern Ionic felt that it had
no alternative but to declare force majeur effective, 19th June. It will allocate deliveries of its alumina
hydrate based products, although it stated that it was confident that it would be able to source
sufficient alumina hydrate from other suppliers to supply product to its customers, although at a
higher price. The alternative sources were not revealed.
No resolution to the problem of reduced capacity is apparent. While there has been no official
announcements, the feeling amongst industry sources is that there will be no resolution until after
the Brazilian elections in October. In the meantime, supplies of hydrate in the USA and Japan are
tight. Alternative sources are being pursued with Japanese consumers most likely looking to
Australia, its second major source of hydrates and possibly even China as alternatives. Noranda’s
Gramercy plant was already in the process of expanding its capacity for hydrates with the
installation of additional filtration equipment and has completed the first phase of its expansion with
the second phase due very soon, which will help to alleviate the situation, but not completely
replace lost supply from Alunorte. Sources in Jamaica and elsewhere have been investigated, but
without equipment in place for filtration of the material it is difficult to react quickly to alleviate the
reduced supply situation. Producers in Europe have reported enquiries from both the USA and Japan
for hydrates, but in general they are working at high levels of capacity and all their product is
allocated to existing contracts so they are unable to supply, certainly for 2018 and probably for
2019.
Rusal
The threat of sanctions against Rusal by the USA caused further anxiety in the overall alumina
market, although its involvement with supply to non-metallurgical applications outside of Russia is
limited. Indications are that with Oleg Deripaska, who was the target of sanctions, stepping back
from his involvement and reducing his ownership of Rusal, that sanctions, which had already been
delayed to October may not take effect. There is still a degree of uncertainty and just the perception
that there may be sanctions has resulted in some companies, particularly US based companies or
those with extensive US interests, trying to avoid doing business with Rusal until there is a degree of
clarity.
Pricing issues
There are several issues influencing prices in the current market conditions. Apart from the Alunorte
Rusal issues, costs of production have been rising rapidly. Caustic soda, a significant part of the cost
of processing bauxite to alumina hydrate, has essentially doubled in price in the last year. Energy,
another significant cost factor especially for calcining the hydrate to smelter grade or nonmetallurgical grades of alumina, has also seen significant increases. Freight costs both for delivery of
raw materials such as bauxite to the Bayer plants or product to customers have also been increasing,
as have labour costs in many regions. All of these factors are leading to upward pricing pressures.
Most non-metallurgical alumina consumers tend to contract for a year or more, although pricing
negotiations may be negotiated on an annual basis for multi-year contracts. The general indications
in the industry are that prices for 2019 are expected to rise by double digit percentages, possibly
20% and some feel that it may be more. It is known that some consumers in the USA have already
had mid-year price increases of 10% imposed and indications that there could be one or even two
more increases before the end of 2018. Few if any contracts have been agreed based on a link to an
alumina index price which has become the norm for third party sales of smelter grade by alumina
producers, many of whom are vertically integrated. Consumers of non-metallurgical grades from
Bayer plants are not normally in a position to tolerate the sorts of fluctuations that can occur with
these index prices, as they cannot easily pass on increases to their customers for say water
treatment chemicals or specialty aluminas.
In 2018 the alumina index prices have been particularly volatile. On 20th March the Metal Bulletin
index was sitting at $374.50 per tonne FOB Australia, but increased soon after to over $450 per
tonne, largely attributed to the developments at Alunorte in what was already a tight market for
smelter grade alumina. When sanctions were announced against Rusal by US authorities some
suppliers and customers invoked force majeur clauses in contracts to comply with US sanctions,
resulting in an even higher price spike, for a brief period going over $700 per tonne. With sanctions
against Rusal delayed till October and possibly not being imposed the index quickly moved down,
falling to a low of almost $440 per tonne before rising again to $527 per tonne at the beginning of
August, which would be an increase of about 40% over the price at the beginning of March.
While consumers of non-metallurgical feedstock grades of alumina will no doubt resist a move to
contracts linked directly to index prices, which they view as essentially spot pricing, the price of
smelter grade alumina certainly plays a role in the contract price for these consumers. It appears
that consumers seem to be expecting an index price of about $450 per tonne at the time of
negotiation of contracts for 2019, which is about a 20% increase over the fourth quarter of 2017
when many contracts for 2018 delivery were concluded. There is an acceptance with increasing costs
of Bayer alumina production that prices will rise. However, consumers wish to insulate themselves
from short term volatility. In addition to the increase in costs for Bayer alumina, producers are also
attempting to improve their margins, which many of them feel have been too low for some time
now. Another factor that will need to be addressed in the next round of contract negotiations is that
the smelter grade alumina market is strong so there will be greater competition for product. As
usual non-metallugical alumina consumers have to contend with Bayer alumina suppliers favouring
sales of smelter grades when demand is high.
The negotiation period for non-metallurgical alumina feedstock contracts for 2019 deliveries seems
likely to be a worrying time for consumers. If the situation at Alunorte in not resolved by that time,
North American consumers of hydrate may opt for alternative sources if they can secure them, even
if prices are higher than they would like. However, some may risk waiting to see if Alunorte resumes
full production in the hope that contract prices will rise less than might otherwise be the case.
Prices for specialty aluminas and products derived from hydrates, will certainly have to rise to reflect
the additional raw material costs possibly at or close to the levels of increase of the feedstock
grades.