The next hot metal: Bauxite?

Nickel prices have surged 45% this year, is bauxite next?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Nickel prices have been going through the roof – thanks mainly to the Indonesian government's decision to impose a ban on exports of the raw commodity – and there's another commodity that could be about to soar too.

It's bauxite – a mineral that is mostly transformed into alumina and with further refining into aluminium. Indonesia has also added tough new restrictions on exports of raw bauxite and as a result, China's imports have dropped dramatically, from 8 million tonnes each month, to just 1.6 million tonnes.

With Indonesia backing away from exports, Australian bauxite miners have an opportunity to fill in the gap in supply. Australia is the world's largest producer of bauxite, of around 30% of global production in 2012, while Indonesia accounted for 12%, according to Geoscience Australia.

Prices for bauxite have been hovering between US$50 and US$60 a tonne in recent times, and several bauxite projects are now looking more commercially viable. Peter Canterbury from Bauxite Resources Limited (ASX: BAU) has told ABC News that prices could run as high as US$75 a tonne, as China's demand continues to grow. The Wall Street Daily is also predicting bauxite prices to surge.

At the same time, aluminium stockpiles are plummeting, suggesting commentators may well be right about the direction of the bauxite price.

And that's one big reason why juniors Australian Bauxite Ltd (ASX: ABZ), Queensland Bauxite Ltd (ASX: QBL) and Cape Alumina Ltd (ASX: CBX) have surged over the past month. Queensland Bauxite has climbed a whopping 238% in the last month, including 80% in the last few days.

Rio Tinto Limited (ASX: RIO) currently operates Queensland's only producing bauxite mine at Weipa in Cape York, but only around a third of the raw material is shipped to China, with the remainder sent to the company's refineries.

That leaves the bauxite juniors with a big opportunity – now all they have to do is get their projects into production, which won't be an easy feat.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »