By Sasenarine Singh
BAUXITE prices remain under pressure, even though the Indonesian ban on the export of raw bauxite came on stream in early 2014. Instead, they have boosted their metal-processing capacity and now export alumina. Undoubtedly, President Widodo of Indonesia continued his predecessor’s strategy and continued the ban in the main with a small amount of bauxite being exported in 2015 so far. However, this strategy did not affect the bauxite market as expected, because of the creeping increase in demand and the strong production from Australia, which is expected to top 82 million metric tonnes in 2015.
Increased production is also expected from the other top five producers of bauxite: China, Brazil, Guinea and India. The production from the top five is more than enough to fill the creeping increase in demand. Unfortunately, bauxite production in the world’s 12th largest producer – Guyana- is expected to decline by some 10 per cent in 2015. To expose the reality of the situation that continues to depress bauxite prices, as of January 2015, there are more than enough open bauxite reserves ready to be mined. These open reserves were recorded at 28 billion metric tonnes. Most of this was located in Guinea and Australia.
The market is somewhat divided. In the short term, the biggest overriding factor is that there is far too much bauxite ready to be extracted that continues to overwhelm demand. Inventories of bauxite have ballooned in the last few years, especially in geographically close China, by far the world’s largest importer of bauxite. This bauxite is coming mainly from Australia and India. As I stated above, the inventories of bauxite easily accessible by the markets are at an all-time record. In China, alone, there is a bauxite inventory of some 50 million metric tonnes of this stuff sitting in ports and at refineries. That is a huge amount, which can take a year of full-steam production to burn through. As a result, we are seeing pressure in front of prices right now, which makes this bauxite market very difficult to make any money. Where is the money? It is in alumina.
With such a state in the market, key players in the industry continue to warn of investment cuts in the bauxite industry, unless China or India accelerate their demand and this seems not to be in their immediate plans. So for 2016, bauxite will remain a very flat market, but opportunities remain upstream in value-added production of alumina (aluminium oxide).
Alumina is extracted from bauxite and is then used in a smelter to produce the highly valuable aluminium. Guyana has produced alumina in the past and we can do it again. It takes about five metric tonnes of bauxite to produce two tonnes of alumina. (see picture below on process). The world-market price for alumina is about US$411 per metric tonne vs. an average of US$76 per metric tonne of bauxite, which Guyana earned in 2015. When you do the arithmetic, it clearly shows that Guyana is losing value, because we are exporting bauxite rather than alumina. From all angles, Guyana and Region 10 will be better positioned to expand their respective inter-related economies if we produce alumina.

Schematics of the process from bauxite to alumina
There is a strong business case to seriously explore the opportunity to establish an alumina plant in Region 10, either at Kwakwani or Linden to secure those value-added inflows for Guyana, along with new jobs. This simple idea opens a whole host of new opportunities for Region 10, which can be classified as a depressed economic zone.
Additionally, opportunities such as the Tiger Hill Falls Hydro Project can produce about 20 MW of electricity to feed the alumina plant, which means more jobs. Our mining policy has to find a way to drive a comprehensive initiative to roll out the red carpet for targeted foreign investors to do these kinds of projects and fast. Every day that goes by, Guyana continues to lose value, jobs and wealth because we continue to produce bauxite rather than alumina. It is in our economic interest that we form a joint venture with the Russians, Chinese (who dominate the bauxite scene in Guyana) and ourselves to make this a reality.
In such a situation, backed by a market hunting for great new opportunities to make money, we have to market Guyana as a location where we can feed the alumina markets rather than the bauxite markets. Indonesia made this decision in 2014 to their benefit and we have to study that model to empower us to replicate it more successfully. As we head into 2016, bauxite finds itself in a tug of war, where low prices remain a reality because of the supply glut and those real opportunities that can be leveraged to climb up to alumina production. Our situation is one of choice now, the lazy approach of staying in bauxite and slowly destroying Region 10 with 1,000 cuts or the ambitious approach of climbing up the value chain to alumina and creating many new opportunities for the regeneration of the economic prospects for the people of Region 10 and at the same time directly contribute to the wealth of the nation.