The next hot metal: Bauxite?

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

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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.

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

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