China Hongqiao eyes African bauxite mine
June 5, 2014 Category Automotive Metals & Minerals, Minerals
China Hongqiao Group, the nation’s largest non-state aluminum producer, is in talks to buy a bauxite mine in Africa to secure the raw material for the processing of the metal. “We are looking to lock up resources in Africa and may make some concrete progress over the next six months,” said Christine Wong, head of corporate finance, without disclosing the target or the price. “We must take a controlling stake to make sure we have the off-take for more than 20 to 30 years.” Hongqiao is seeking bauxite supplies after Indonesia banned exports of unprocessed ore in January. The company, one of the lowest-cost smelters in China, is increasing output after rivals including Aluminum Corp of China shut down plants. “Demand is still strong even as China is forecast to slow down this year,” Wong said. “We see demand from the construction of social housing, high-speed railways, ultra-high-voltage grids and coal cars.” Hongqiao plans to boost production by 30% to almost three million tons this year. The plan may help Hongqiao become China’s biggest aluminum smelter by output, surpassing Aluminum Corp, which plans to shut as much as one million tons of capacity out of 3.6 million tons. Hongqiao has 16 million tons of bauxite stockpiles, enough for about 14 months. It also has signed a three-year supply contract with Rio Tinto Group to buy at least three million tons annually from Australia and has supply agreements with India. Hongqiao may increase its aluminum refining capacity to 3.44 million tons by the end of this year from 2.96 million tons in 2013. The company is building a venture for an alumina plant in Indonesia and expects to start production in 2015. Hongqiao’s capital expenditure this year will be reduced to CNY8 billion, largely for building power plants, from about CNY15 billion last year. About 95% of Hongqiao’s sales are shipped in molten form to customers within a 30 km radius of its Shandong facilities, said Vanessa Lau, Senior Analyst with Sanford C. Bernstein.
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