I

Bauxite and Aluminum Handbook

Commodities and Export Projections Division
Economic Analysis and ProjectUonsDepartment

.
 February 1981

TABLE OF CONTENTS

Page No.

I. CHARACTERISTICSOF BAUXITE/ALUMINA/ALUIMINUM
.............. 1
A. Introduction .......... 1
B. t ........
Definition of Products ....... . . ......... * 1
C. Uses ....... . . ..... 2
D. Technology . . ... ... 5

II. THE LOCATIONOF THE INDUSTRY

.......................#...... I
A. ...
Production...... .. .... ..
..................... 1
B. Consumption....... ... .. to. 6
C. Trade.................................. 8

III. THE STRUCTURE OF THE INDUSTRY........................ 1

A. Organization ................... .- .. ....... ... 1
B. # ............................
Marketing ............. 4

O ZIV.ECONOMIC PARAMETERS FOR MARKET ANALYSIS OF THE

BAUXITE-ALUMINUMINDUSTRY......................................... . 1
A. Demand and Supply Elasticities........ ........... 1
B. Price DeterminationMechanisms....................... 2

V. MARKET PRICES FOR BAUXITE, ALUMINA AND ALUMINUM.......... 1

A. .... .*...............
Bauxite................................ 1
B. Alumina .............
................................. 7
C. Aluminum,, ........**..............#....**.*.....................
7

VI. SPECIAL ISSUES........................................... 1

A. 1
Shipping....................... .0.0.......................
B. The InternationalBauxite Association (IBA) .......... 3
C. The Integrated Program for Commodities............... 4
D. United States Government Stockpile................... 5
 February1981

List of Tablesand Figures

Tables PageNo.

I-1 Classification
of Bauxite/Alumina/Aluminum
Products. ..... . ................................. I - 3

1-2 Consumption
of Aluminumby End Uses, 1978............... I - 4

I-3 Main Inputsto ProduceOne MetricTon of Bauxite

........ I - 7

I-4 Inputsto ProduceOne MetricTon mt of Alumina

.......... I-9

1-5 EstimatedInputsto ProduceOne MetricTon

..............
of Primary Aluminum Metal ........ .......... . I - 11

II-1 World Bauxite Reserves.. ........

o .a ....... .. . II - 2

11-2 Bauxite- World Productionby Main Countries

and Economic Regions .. ....... II - 3

II-3 Alumina- World Productionby Main Countries

................................ II - 4
and EconomicRegions...

@ II-4 PrimaryAluminum- World Productionby Main

Countriesand EconomicRegions o..................
........ II - 5

II-5 Primary Aluminum - World Consumption by Main

Countries and Economic Regions.. ........................ II - 7

II-6 Bauxite - World Exports by Main Countries

and Economic Regions ........ o ........... o.........o ...... II - 9

II-7 Bauxite - World Imports by Main Countries

and Economic Regions .................................... II - 10

I}-8 Primary Aluminum - World Exports by Main

Countries and Econom ic egions .......................... II - 11

II-9 Primary Aluminum - World Imports by Main

Countries and Economic Regions................. ........ 11 - 12

111-1 Company Concentration in Bauxite Mining, 1977.......o.... III - 2

III-2 Company Concentration in Alumina Refining, 1977 ......... III - 2

III-3 Company Concentration in Primary Aluminum

Smelting, 1977 ......
o ....... .. III - 3

@ III-4 Post-Kennedy Round Tariffs

Aluminum.**...........
.
on Bauxite,
......
Alumina
9................... . ..
III.- 6
February l9Rl

List of Tables and Figures (Cont'd)

Tables Page No.

IV-1 Elasticitiesfor Bauxite/Aluminum

...................... IV - 3

V-1 Bauxite Prices, World Bank Estimates, 1960-1980........ V - 4

V-2 Prices of Jamaica Bauxite Imported Into the United

States 1972-1977, U.S. Dollars Per Metric Ton......... v - 5

V-3 Approximate Bauxite Prices, Taxes, and Impact on

Alumina Costs, Western Countries, 1977.... -.......
.v - 6

V-4 Average Prices of Alumina at the U.S. for

Shipments From Different Countries..................... -8

V-5 .........
Main Pricing Systems for Aluminum............. V - 9

V-6 Primary Aluminum Prices 1950-1980...................... V -.11

VI-1 Principal Ports Loading Bauxite and Alumina............ VI - 2

VI-2 U.S. Government Desired Inventory Mix for

Stockpile Groups ......... ... VI - 7

Pigure

I-1 Plants and Products of the Aluminum Industry........... I- 6

February 1981

Conversion Factors

Product Inputs to Produce 1 ton of Product

Alumina 2 - 2.5 tons of Bauxite

Aluminum 1.9 - 1.95 tons of Alumina

Aluminur 3.8 - 4.9 tons of Bauxite

Calcined Abrasive Bauxite 1.75 tons of Bauxite

Calcined Refractory Bauxite 1 8 tons of Bauxite

 February1981 I-1

I. CHARACTERISTICSOF BAUXITE/ALUMINA/ALUMINUM

A. Introduction
1. Bauxite, which consistsof oxide type ores containinghydrated
alumina is mainly used for the production of aluminum. In addition, minor
amounts of bauxite and alumina are consumed in the refractory, abrasive and
chemical industries. 1/ Aluminum is obtained from two basic sources: (i)
bauxiteores which dre refinedinto aluminaand then processedintoaluminum
and (ii)aluminumfrom scrap.2/

B. Definitionof Products
2. The principaltypesof bauxiteare the trihydrate,gibbsite
'A103 .3H2 0) and the monohydrates,
boehmiteand diaspore(A1203 .H2 0). Mono-

nydratesare commonlyfound in Europeand NorthernAsia. In otherparts of

the world,bauxiteis foundas gibbsite,but in some cases containingas much
* as 20 percentboebmite. Trihydratebauxiteis preferreddue to its higher
solubilityin causticsolutionsand the lowerpressuresand temperatures
requiredfor the refiningof alumina.3/ The most objectionableimpurities
associatedwith bauxiteare silicatesand iron oxide. Bauxitewith a low iron
contentmay be used in the chemicalindustry. Calcinedbauxite,preparedby
heatingbauxiteat high temperature is used by the refractories
industryand
to make intermediate
abrasiveproducts.

3. Alumina,is aluminumoxide (A1203 ) used for the productionof

aluminumand in lesseramountsto producecalcinedaluminafor the manufacture
of fusedaluminaabrasivesand high temperature
refractoriesand activated
aluminafor chemicalprocesses.

1/ In the U.S., about 12 percentof the aluminumconsumedin 1975was used as

bauxiteor aluminain nonmetalapplications.See Stamperand Kurtz.

* 2/ In the U.S.S.R.,aluminais also extractedfrom nephelineand alunite.

.3/Stamper and Kurtz.

February1981 I-2

4. Aluminumscrap is classifiedinto new and old scrap. New Scrap is

gereratedin the manufactureof primaryaluminumand of aluminumproducts.
It may be recycledby the same companythat generatesit or purchasedby
other companies. Old scrapcomes from discarded,used and worn out products
such as aluminumenginesor body parts,used aluminumcans and utensilsand
old wire and cable.1/

5. Aluminummetalhas relativelylow densitv,high electricaland

thermalconductivity,good resistanceto corrosionand may be alloyedand
treatedto yield a high strergth-to-weight
ratio.2/ Aluminumis available
commerciallyas ingotswith a minimumcontentof 99.5 percentaluminum.
Higherpricesare paid for purer grades.

6. Ingots,moltenaluminumand aluminumscrapwith alloyingmaterials

are transformed
into mill products,such as bars, rods and wire; plates,
sheetsand strip;tubes rnd pipes;and other products.

C. Uses

7. Most of the bauxiteis used for the productionof alumina. The

remainderis used as bauxiteby the abrasive,refractoryand chemicalindus-
tries;to producealuminumsulfateand other chemicalsfor water treatment
and for the paper industry;and for cements,catalystsand fluxes.

8. Alumina is mainly used to produce aluminum. Other uses are as

calcined alumina in the abrasive, refractory and glass industries; as alumina
hydratesto producealuminum chemicals and fire retardants; in tubular form
for ceramicsand refractories,
and as activatedaluminaused to dehydrate
liquidsand gases in the chemicaland petroleumindustries.

9. Consumptionof aluminummetal by end uses is shown in Table I.2.

The transportation
industryaccountsfor about one fourthof metal consumption,

1/ Ibid.

2/ Stamperand Kurtz.
February 1981 1-3

Table 1.1: CLASSIPICATIONOF BAUXITE/ALUMINA/ALUMINUMPRODUCTS

Product SITC /a

Dried Bauxite 287.31

Alumina 287.32

Aluminum Ingots 684.1

Aluminum Products: 684.2

Bars, rods, angles,

shapes, sections
and wire 684.21

Plates, sheets and

Strip 684.22

Foil 684.23

Powders and flakes 684.24

Tubes, pipes and

blanks thereof,
hollow bars 684.25

Tube and pipe

fittings 684.26

/a SITC Revision 2.

Source: United Nations, "Standard InternationalTrade Classification,

Revisiou 2, New York, 1975.
 Table I.2: CONSUMPTION OF ALUMINUM BY END USES, 1978

W. Europe /1 Japan U.S. World Average

Transport 29.5 23.1 23.6 24.9

Mechanical Engineering 6.8 4.5 6.1 5.9

Electrical Engineering 9.7 10.5 10.2 10.1

Building and Construction 16.7 34.4 23.8 24.2

Packaging 10.4 6.8 22.0 16.2

Domestic and Office Appliances 9.3 6.2 7.2 7.5

Metal Industries and Miscellaneous 17.6 14.5 7.1 11.2

100.0 100.0 100.0 100.0

/1 Germany, France, United Kingdom, Italy

Source: Computed from Metal Statistics,Metallgesellschaft,66th Edition, 1979.

* * *~~~~~~
February1981 I-5

where aluminumis used in motors,vehicleparts,electricaluses and paints.

The main attractionof aluminumin this sectoris its high strengthto weight
ratio. Near to 6 percent of aluminum metal is for machinery and equipment
(mechanicalengineering). The electrical engineeringand communications
sectoruses one tenth of the aluminummetal produced. Alam1num'shigh elec-
tricalconductivity
and lowerdensitythan copperare responsiblefor the
of the lattermetal in many applicationsin this sector. About
displacement
one fourthof aluminumconsumedis used in buildingand construction,
for
doorsand windows,heatingand air conditioning,
structuresand other uses.
Resistanceto corrosionhas permittedthe replacement
of steel and other
materialsby aluminumin packaging,such as flexiblepackaging,food con-
tainers,metal cans and foil. Consumptionof aluminumby the packagingsector
as a percentageof totalconsumptionvarieswidely,from a low 6.8 percentin
Japan to 22 percentin the UnitedStates. About 7.5 percentof aluminumis
for the productionof consumerdurables,such as refrigerators,air condi-
tioners, washing machines and other appliances.

D. Technology

10. metals,bauxitemining costs

Compared with othernon-ferrous repre-
sent a smallpercentageof total costsof metal production.Many deposits
requirelittleor no strippingof the overburden.For example,in Jamaica
and Weipa in WesternAustralia,no blastingis required,the few feet of over-
burdenbeing removedby bulldozersand scraperloaders. In Europe,the over-
burdenis much thicker,requiringunderground mining. Ore benefication is
limited to crushing, washing or wet screening and drying. Diffe.ences in
thicknessand hardnessof the overburden,
moisturecontent,inlandtransporta-
are reflectedin the wide varia-
as well as infrastructure
tion requirements
tionsin bauxiteminingcostsestimatedin 1980 betweenUS$12/mtand US$30/mt.
Labor accountsfor 20-30percentof the cost,energyfor about 25 percent,and
depreciationand interestfor another30 percent. Besides,some of the main
producingcountrieshave imposedlevieson bauxiteminingwhich go from US$10
costsof bauxitealso accountfor
to US$27 per metricton. 1/ Transportation

I/ In 1980,basedon an aluminumpriceof $1,550per ton.

February1981 I-6

Pinure I.1: PLANTSANDPRODUCTS'F THE ALUtHUM INIUSlTRY

Taub ite
PeIe,

Sa Iaefpinery Calcination Chemical

Sc.apano isecor acIn_ey,dustry Plaet
CalciCned
Alumina cite
BaPe
(Refractory or
Abrasive)

.Secaondary Primary- - Refractory

Smelter Smelter and
AbrasiLve
r -- < bix~~~~~ldutries
I Guminua 4Auminu

Bar, Sheet, Rod,

Plate, Wire, Tue,
Powder, etc.

'Sesr 1 llnufacturing Plants

Old BuiLldings. Houses, Autombilles,

Scrap Transmissioan IJnes, lachftuT,
Cans, etc.

Source: World Bank, E'conomicAnalysis and Projections Department,

Division,February1981.
and ExportProjections
Comumodities
February 1981 1-7

a signlficant part of the delivered cost of bauxite ranging from US$6.25/mt

from Jamaica to the U.S. East Coast to US$29.50/mt from Australia to Europe.

Table 1.3: MAIININPUTS TO PRODUCE ONE METRIC TON OF BAUXITE

Type of Bauxite

Caribbean South America

Energy, million B.u /1

Mining and drying (oil, gas,
electricity) 0.25 - 0.45 0.5 - 0.8
Shipping to U.S. ports (oil) 0.45 - 0.70 1.0 - 1.3
Total Labor and supervision,man-hours 0.9 - 2.0 0.8 - 2.3

/1 Assumed energy equivalent of oil is 150,000 Btu per gallon, natural gas
1,000 Btu per cubic foot, coal and pitch, 24 million Btu per short ton;
petroleum coke, 26 million Btu per short ton, electricity, 3.413 Btu per
Kilowatt-hour.

Source: Stamper, John W., and Horace F. Kurtz, Mineral Facts and Problems,
1975 Edition, Bureau of Mines, U.S. Department of the Interior.

11. Most of the commerciallyproduced alumind is obtained by the Bayer

occur in the U.S.S.R., where alumina is obtained
process. The main exc-'-tions
from diaspore (monohydrate)by the Pedersen process which involves sintering
and from nepheline and alunite, by a different process which consists of
sintering and leaching. The Bayer process consists basically of four stages:
February1981 I-8

0
(i) Digestion. Bauxite,causticsoda (whichmay be made
from - CaO - and soda ash - Na2CO3 ) and hot water are

digestedat elevatedtemperature
and pressure. Bauxite
is dissolved,while silica,iron oxide and other
impuritiesremaininsoluble.Leachingtemperatures
range from about 220°Ffor trihydratebauxiteup to
550°Fwhen most of the bauxiteis presentin monohydrate
form. Approximately
1.1 weightunits of aluminaand 1.2
unitsof soda are lost for each unit of reactivesilica.
Bauxitewith more than 8 percentsilicaneeds a previous
leachingtreatment.

(ii) Filtrationand Settling. The resultingsolutionis

cooledto atmospheric
boilingtemperature.The red
mud of insolublesis partiallyseparatedby decantation
in settling tanks, which is then pumped to a disposal
pond.

(iii) Precipitation. The liquid sodium aluminate is cooled

until it becomessuper3aturated
and then seededwith
aluminumhydroxidecrystals,which graduallysettle
out of the solution.

(iv) Calcination. The aluminumhydroxidecrystalsare

roastedat more than 10000 C to removethe water.

£he different ore qualities such as bauxite type, alumina content and impuri-
ties influence considerably the processing conditions and production costs.
For technical and economic considerations the alumina refineries are limited
to specificbauxitequalityranges. Table I.4 shows the inputs required to
produceone metricton of alumina. Representativecurrentcostsof production
at a bauxiteproducingcountryare about US$130/metricton, includingbauxite
costsbut excludinglevies.1/

1/ In 1980 US dollars.
February 1981 I-9

Table I.4: INPUTS TO PRODUCEONE METRIC TON mt OF ALUMINA

Type of Bauxite

Caribbean South America

Bauxite - dry metric tons 2.4 - 2.5 2.05 - 2.4

Caustic or equivalent soda ash and lime

Na OH pounds 115 - 155 126 -160

Lims (CaO) pounds 34 - 135 57 - 115

Starch pounds 17 - 23 2 -3.5

Energy, million Btu: /1

Steam (coal, oil, gas) 14 - 17 11 -14

Calciningalumina (oil, gas) 4- 6 4 6

Miscellaneoususes (coal, oil,
gas, electricity) 1 -2 1-3

Total labor and supervisionman-hours 1.7 - 3 1.7 - 3

/1 a. Assumed energy equivalent of oil is 150,000 Btu per gallon; natural gas,
1,000 Btu per cubic foot; coal and pitch, 24 million Btu per short ton;
petroleum coke, 26 million Btu per short ton, electricity, 3,413 Btu per
kilowatt hour.

b. Excludes energy required to produce lime and caustic soda, estimated at

.3 - .6 million Btu and 2.4 - 4 million Btu, respectively,per metric
ton of alumina.

Source: Stamper, John W. and HoraceF. Kurtz, Mineral Facts and Problems, 1975
Edition, Bureau of Mines, U.S. Department of the Interior.
February1981 1-10

12. Aluminumis producedfrom aluminaby electrolysis,using the Hall-

Heroultprocess,developedin 1886. An aluminumsmelterconsistsof one or
more pot lines,each containingabout 125 - 150 electrolytic
cells. The cells
consistof a carbon-linedbox containinga pad of moltenaluminum(cathode),a
carbonanode and a moltenbath of naturalor syntheticcryolite(NA3Al F6).
Electrolysisof aluminatakesplace in the cryolitebath. Cryoliteand
to maintainthe adequateratio
aluminumfluorideare added to the electrolyte
of sodiumand aluminumfluoride. The anode,which is consumedduringthe
operation,is replacedby the Soderbergcontinuousmethodor the prebaked
method.

13. Aluminumsmeltingis energy intensive.Electrolysis of aluminum

to produceone metric
requiresabout 14,000kwh to 16,000kwh of electricity
ton of primaryaluminum(TableI.5). Productioncosts of aluminumrange
betweenUS$1,100/mtand US$1,700/mt dependingon the age of the plants,on
the sourceof power and on plant location.

14. Molten aluminumcan be cast into ingotsor used directlyat adjacent

mills. Ingots,moltenaluminumand aluminumscrapwith alloyingmaterialsare
transformedinto mill products.

15. Currentresearchin aluminumtechnologycentersarounddeveloping

processesto producealuminafrom other sources(clay,anorthosite, alunite
and dawsonite)and in improvingthe energyefficiencyof both the Bayer process
to producealuminaand cf the Hall Heroultprocessto producealuminum. A new
processto produceprimaryaluminumhas been reportedby Alcoa. This involves
the chlorinationof aluminato producealuminumchlorideand the electrolytic
reductionof the aluminachloridebath. Accordingto Alcoa, this process
operatesat reducedtemperatures, avoids fluoridepollutionand uses 30 percent
less electric energy than the Hall-Heroult process.

0
 February 1981 I-ll

* Table I,5; ESTIMATEDINPUTS TO PRODUCEONE METRIC TON OF PRIMARYALUMINU METAL

Type of Anode

Prebaked Soderberg

Alumina metric tons 1.9 - 1.95 1.9 - 1.95

Makeup cryolite (Na3AlF6) pounds 10 - 80 10 - 80

Makeup aluminum fluoride (AlF3) pounds 28 - 65 28 - 65

Calcium fluoride (CaF2) pounds 4.5 - 9 4.5 - 9

Energy, million Btu: /1

Alumina reduction (electricity) 50 - 60 60 - 70

Electrode carbon

Petroleum coke, calcined

(800-1,050pounds) 10 - 13 10 - 11

Pitch (300 - 360 pounds) 3.5 - 4.5 3.5 - 4.5

Anthracite coal (55 - 90 pounds) .6 - .8 .8 - 1.1

Anode and cathode baking

(oil, gas, electricity) 2.5 - 6 .11 - .22

Holding furnace, ingot casting

and melting operations (gas,
oil, electricity) 6 - 8.5 6 - 8.5

Total labor and supervision man-hours 9 - 17 11 - 22

/1 a. Assumed energy equivalent of oil is 150,000 Btu per gallon; natural gas,
1,000 Btu per cubic foot; coal and pitch, 24 million Btu per short ton;
petroleum coke, 26 million Btu per short ton; electricity,3,413 Btu per
kilowatt-hour.

b. Excludes energy required to produce fluorine compounds, estimated at

2.2 - 8 million Btu per metric ton of primary aluminum, and to calcine
petroleum coke, equivalent to about 1 - 2 million Btu per ton of primary
aluminum.

* Source: Stamper, John W. and Horace F. Kurtz, Mineral Facts and Problems, 1975.
Edition, Bureau of Mines, U.S. Department of the Interior.
February 1981 1-12

REFERENCES

1. Banks, Ferdinand E., "Bauxite and Aluminum: An Introduction to the

Economics of Nonfuel Minerals" (LexingtonBooks, Lexington,
Massachusetts,1979).

2. Brubaker, Sterling, "Trends in the World Aluminum Industry" Resources of

the Future (Johns Hopkins Press, Baltimore, 1967).

3. Hashimoto, Hideo, "Bauxite Processing in Developing Countries" Draft,

World Bank, December 1980.

4. Metallgesellschaft,"Metal Statistics" (Frankfurtam Main) (Annual).

5. Stamper John W., and Horace F. Kurtz, "Aluminum" in "Mineral Facts and
Problems, 1975 Edition" (Bureau of Mines, Washington, D.C., 1975).

6. UNIDO, "Mineral Processing in Developing Countries" (Vienna, October 1980).

 February1981 II-1

II. THE LOCATIONOF THE INDUSTRY

A. Production
1. Bauxitereserves(reservebase) 1/ are estimatedat 22.7 billion
tons. As can be seen from Table II.1, sevencountriesaccountfor over 75 per-
cent of world reserveswhich in orderof importanceare: Guinea,Australia,
Brazil,Jamaica,Guyana,Greeceand Suriname.

2. World productionof bauxitereached76.3millionmetric tons in 1979,

equivalentto about 0.3 percentof bauxitereserves. In the last two decades
Australiahas risen to be the main bauxiteproducingcountry,participating
in
1979 with over 31 percentof the shareof world output,higherthan its share
in world reserves(20.2%). Guineahas also increasedsignificantly
its bauxite
output,but to a lesserextentthanAustralia. Jamaicaand Surinamemaintain
theirpositionof importantproducersand exportersof bauxite,theirshare of
world outputbeing higherthan that of their shareof reserves. Brazilhas
startedin the last decadean intensiveprogramof bauxite exploration
and
exploitation,
backedby its considerable
reserves.

3. World productionof aluminahas grown at 7.4 percentper annum from

1966 to 1977,decreasingto 3.1 percentper annum from 1977 to 1979 due mainly
to the slowdownof the world economy. Since 1977,Australiahas become the
most importantaluminaproducerdisplacingthe UnitedStates. In 1979,
Australiaaccountedfor 23 percentof the world aluminaoutput,UnitedStates
20 percent,Jamaica6.4 percentand Japan5.6 percent.

4. Primaryaluminumworldproduction,grew at 6.9 percentper annum

from 1960 to 1977,and at 2.8 percentper annum from 1977 to 1979, totalling
15.2millionmetrictons in 1979. As can be seen in Table II.4, the shareof
aluminumoutputin developingcountrieshas Increasedsubstantially, from 3.2%
in 1960 to 13.7% in 1979, reflectingthe availability
of hydroelectrical

* 1/ It Includesdemonstratedreserveswhich are currentlyeconomicas well as

thosewhich are marginallyeconomicand some which are currentlysubeconomic.
February 1981 II-2

Table II.1: WORLD BAUXITE RESERVES

(ThousandMetric Tons)

Share of
Volume World Total

United States 40,000 .2

Australia 4,600,000 20.2

Brazil 2,500,000 11.0

Greece 700,000 3.1

Guinea 6,500,000 28.5

Guyana 700,000 3.1

Jamaica 2,000,000 8.8

Suriname 490,000 2.2

Other Market Economy Countries 4,000,000 17.6

Hungary 300,000 1.3

U.S.S.R. 300,000 1.3

Yugoslavia 400,000 1.8

Other Central Economy Countries 200,000 .9

WORLD TOTAL 22,700,000 100.0

Source: Bureau of Mines, Mineral Commodity Summaries, 1980.

 I-A
co
Table 11.2: LAUXITE /a - WORLDPRODUCTIONBY MAIN COUNTRIESAND ECONOMICREGIONS

Volume C th Ra e Share of World Total

1960 1965 1970 1975 1977 1978 1979 1960-717 1977-79 1960o 190710 1979

-~~~~~~~~~-( 004 toas) -- - - --- ---- --------

(2 per anausJ ------

Industrialized
Countries 4.513 5.779 14.650 25.353 30.176 27.965 31.332 14.9 1.9 16.3 24.1 35.7
of which: Australia 70 1.186 9.256 21.034 26,086 24,293 27.584 41.6 2.8 02 241 31.4

DeveloPiXkR Countries 17 979 24,828 36 178 40,623 43 355 44 344 44.960 5.8 1.8 65.1 59.o S.1
Africa, South of Sahara I2-134 T. 83 9,455 12,69 T3-t2
13,130 13.2; 372 5.7 31X 14.9
of which: Guinea 1,378 1,600 2,490 8.406 11.300 11,648 12,199 12.9 3.9 5.0 4.1 13.9
South Africa O 0 0 0 0 0 0 /c /c 0 0 0
North Africas HiddleEat 0 0 0 0 0 0 0 /c /c 0 0 0
Asia & Pacific. 1,532 2,389 3,743 2,791 3,430 3.285 3,415 5.5 0.0 5.5 6.2 3.9
of which: India 387 707 1,374 1094 1,512 1.663 1,934 7.9 13.1 1.4 2.3 2.2
Latin America & Caribbean 12,959 17,442 24,702 22.426 22,082 22,676 22.323 4.0 0.5 46.9 40.7 25.4
of which: Jamaica 5,837 8,651 12,010 11.570 11.433 11,736 11,505 4.4 0.3 21.1 19.8 . 13.1
Suriaaume 3,455 4.360 6.022 4.751 4.856 5,113 4.741 3.4 -0.1 12.5 9.9 5.4
Guyana 2,511 2,919 4.417 3.828 3.344 3,479 3,354 2.7 0.1 9.1 7.3 3.8
Bratil 121 188 510 969 1,035 1.131 1,642 15.8 26.0 0.4 0.8 1.9
Southern Europe 1,911 2,863 4,48 5,951 5,521 5,689 6,092 6.7 5.0 6.9 7.3 6.9

Centrally Planned Economies 5.128 6.686 9.698 11,269 11,557 11,650 11.626 4.9 0.3 18.6 16.3 13.2

WURLD TOTAL 27,620 37,293 W,726 77,245 8«^D83 83,959 87,918 7.7 1.6 100.0 100.0 100.0

HAX$ET ECONOMIES 22,492 30.607 50,828 65,976 73,531 72,309 76g292 8.2 1.9 81.4 83.7 86.8

/a Gross Weight.
tb Preliminary
tc Incomputable
Source: Metallaesellachaft. Metal Stcistics and World Bureau of Mines. World Metal Statistics (actual):
World Bank. Economic Analysis and Projections Department (projected).
 OD

Table II.3: ALUMINA- WORLDPRODUCTIONBY MAIN COUNTBIESAND 2CON0MICREGIONS

Volume Growth Rates Share of World Total

1966 1970 1975 1977 1978 1979 1966-77 1977-79 1966 1970 1979

-------------- (- O ctous)e000 _ _-_-

-- --- __ -- (Z per snaum)--
j griale ed Countries 9.054 12,774 16,077 19,219 19,246 20.231 7.1 2.6 61.2 60.3 62.6
UnitedStates S,338 6.051 5,135 6,033 5.960 6,450 1.1
turopea Economic 3.4 36.0 28.5 20.0
Cowunity 1,717 2,074 3,114 3,421 3.689 3.720 6.5 4.3
Japan 11.6 9.8 11.5
662 1,285 1,565 2,045 1,767 1.822 10.8 -5.7 4.5 6.1 5.6
Australia 307 2,152 5,129 6,659 6,776 7,415 32.3 5.5 2.1 10.2 23.0
Developing Countries 2.479 4,608 5,831 6.031 6 9219 6.624 8.4 4.8 16.7 21.7 20.5
Africa.Southof Sabara 525 610 639 562 622 662 0.6
of whichb Guinea 8.5 3.5 2.9 2.0
525 610 639 562 622 662 0.6 8.5 3.5 2.9 2.0
WortbAfrica Mlddlelaat 0 0 0
Asiaand Pacific 205 369
0 0 0 /a /a n 0 0
383 438 531 551 7.1 12.2 1.3 1.7 1.7
LatinAmerican6 Caribbean 1,581 3,191 3.969 3,888 4,017 4,02 8.5
of which: 1.5 10.7 15.1 12.4
Jamaica 804 1,719 2,259 2,047 2,141 2.074 8.9
Surinasa 0.6 5.4 8.1 6.4
407 1,036 1.148 1,215 1,261 1.199 10.4 0.0 2.7 4.9 3.7
Guyana 302 317 294 277 250 280 -1.0
Brazil 0.0 2.0 1.5 0.9
68 119 268 349 365 449 16.0 13.4 0.5 0.6 1.4
Southera Burope 168 438 840 1,143 1.049 1,409 19.0 11.0 1.1 2.1 4.4
Centrally Planned Economies 3,275 3816 4,772 5,262 5,362 5,444 4.4 1.7 22.1 18.0 16.9
WORWD
TOTAL 14,808 21,198 26,680 30,512 30,827 32,299 6.8 2.9 100.0 100.0 100.0
MARgETECONOMIES 11.533 17,382 21,908 25,250 25,465 26.855 7.4 3.1 77.9 82.0 83.1

/a Incomputable.

Source: Metallgesellschaft,Metal Statistics and World Bureau of Mines, World Metal Statistics
(actual);World Bank, Economic Analysis and Projections Department.

* * * 4~~~~~
 table11.4: PRDHARYALUMHNUM- WORLDPRODUCTION AND ECONOMICREGIONS
BY HAINCOUNTRIES 1-'

Volume GrowthRates Shareof WorldOutput

1960' 1965 1970 1975 1977 1978 1979 1960-77/1977-79 1960 1970 1979

------- _-( Million tona) ------------ -(X per annum)--

IndustrializedCountriea 3.475 4.818 7,263 8.441 9.626 9,869 9,873 6.2 1.3 76.7 70.5 64.9
of whicbs
UnitedStates 1,828 2,499 3,607 3,519 4,118 4,358 4,557 4.9 5.2 40.4 35.0 29.9
European EconomicComsimity 517 735 952 1,816 1.987 2,007 2,021 8.2 0.9 11.4 9.2 13.3
Japan 133 292 728 1,013 1,188 1,058 1.010 13.7 -8.8 2.9 7.1 6.6
Canada 691 753 962 878 973 1.048 864 2.0 -6.7 15.2 9.3 5.7
Norway 171 276 522 595 637 657 674 8.0 2.9 3.8 5.1 4.4

Developing Countries 143 273 792 1,453 1,687 1.729 2,092 15.6 11.4 3.2 7.7 13.7
Africa!Southof Sahara -51 165 271 278 236 300 11.4 3.9 1.0 1.6 -.0
of wbicbt
Ghana 0 0 113 143 154 114 169 /a 4.8 0 1.1 1.1
SouthAfrica 0 0 0 76 78 81 86 7i 5.0 0 0 0.5
NorthAfrica. MiddleEast 0 0 0 164 233 249 238 1.1 0 0 1.6
Asia & Pacific 27 83 205 213 231 273 286 13:4 11.3 0.6 2.0 1.9
of whichIndia 18 64 161 167 184 205 212 14.6 7.3 0.4 1.6 1.4
Latin America & Caribbean 18 53 167 275 360 407 667 19.3 36.1 0.4 1.6 4.4
of which:
Brazil 18 30 56 121 168 186 238 14.0 19.0 0.4 0.5 1.6
Venezuela 0 0 22 50 43 71 207 /a 119.4 0 0.2 1.4
SouthernEurope 54 91 255 530 586 564 601 15.0 1.3 1.2 2.5 3.9

CentrallyPlannedeconomies 911 1,491 2.246 2.941 3.046 3,156 3.247 7.4 3.2 20.1 21.8 21.3

WORLDTOTAL 4_529 6_587 10.301 12,835 14,360 1415 15,217 7.0 2.9 100.0 100.0 100.0

ECONOMIES
MARKET 3.618 5.096 8.055 9,894 11,314 11.598 11.970 6.9 2.8 79.9 78.2 78.7

/a Incomputable.
Source: MNtallgesellacbaft, Metal Statistics and Vold Bureau of Mines. World Metal statistics (actual); World bank, Economic Analysis and Projections Departmeat t-4
February 1981 11-6

potentialand other types of cheap energyin these countries(electrical

energyrepresentsabout 25% of the productioncost of aluminumat a price of
electricity
of 1.5 US(,Ikwh).

5. Aluminumrecoveredfrom scrap is an importantsourceof metal for the

aluminumindustry. Scrap recoverieswere estimatedfor Westerncountriesat
856 thousandmetric tons in 1960,2,183 thousandmetric tons in 1970 and 3,752
thousandmetrictons in 1979,which representsa growthrate of 8% per annum
from 1960 to 1979.1/ This rate of production,
higher than that of primary
aluminum,reflectsthe increasedinterestby the industryin purchasingscrap
which requires significantly less energy than alumina to be processed into
aluminum. 2/

B. Consumption

6. Consumption of aluminum during the sixties and seventies has grown

at a higher rate than other major metals. The annual growth rate for aluminum
consumption has been 8 percent from 1960 to 1977, and 5.8 percent from 1977 to
1979, which nearly doubles that of copper, and more than doubles that of tin.
The growth of aluminum consumption has been due to the substitution of aluminum
for othermaterialsin a wide rangeof end uses due to its favorableprice
levelsas well as physicalproperties.Aluminumt1-spartiallysubstituted
copperin overhead transmission cable, and is continuously penetrating into
the beverage container market, mainly at the expense of steel. For weight
saving purposes, the use of aluminum has expanded considerably in the trans-
poration sector. Aluminumis used in construction both for its physical pro-
perties as well as for its appearance.

1/ Metallgesellschaft, "Metal Statistics".

2/ Banks (op. cit.) mentions that the energy used to produce a unit of aluminum
from scrapis between5% to 20% of thatneeded to producean equivalentamount M
of primary aluminum.
 OD

Table II.5: BY MAN COUNTRIES

PRIMARYALUMIiM - WORLDCONSUMPTION QEGIONS
ANDECONOMIC

Volu _ Crowth Rates Share of World Total

1965 1970 1975 19$/ 1978 1979 1960-7771977-79 1960 1970 1979
1960

('000 tons)-- - - ---- -(1 per anua-) - - -

--

7.104 7.310 9.128 10.221 10.725 7.3 5.0 74.3 71.4 67.0
Industgiali1ed Countries 3,047 4.845
37.6 15i 3L.3
of whichs UnitedStates 1. ~1 2.825 -3.7488 3,265 ttR75-64.97 .009 6. 2.-6
2,00a 2,039 2,598 2,654 2,888 6.2 5.4 26.0 20.2 18.0
Europeaa2cowi.1c Commaity 1,065 1,264 11.2
298 911 1,171 1,422 1 656 1,802 16.3 12.6 3.7 9.2
Japan 151
796 1.292 1 565 1.853 1.921 14.9 10.8 3.4 8.0 12.0
)evealo;na Countries 141 394
Azrica.Southof Sahera -it -20 -60 95 e81 80 X3 =1. 0.3 0.6 0.5
49 66 53 51 55 12.3 1.9 0.) 0.5 0.3
of blch; SouthAfrica 11 20 0.8
11 18 70 99 136 121 /A 10.6 0 0.2
Notth Aftlca6 MiddleEast 0 0.6 2.5 3.S
25 103 246 283 394 553 561 15s.0 19.3
Asia& Paciflc 563 14.0 17.6 1.1 1.9 3.5
LatinA erics& Caribbean 44 117 186 382 407 480
143 286 462 587 552 541 15.0 -4.0 1.4 2.9 3.4
Southera Eurppe 61
.392 2,046 2,6 2,984 3 312 3 371 7.4 6.3 22.2 20.6 21.0
Centrally Planaed Econooies 912 1

4, 6.631 9.946 1128 14,277 15.386 16,017 7.9 5.9 100.0 100.0 100.0
WORLD DOTAL
7?900 86 129074 12,646 8.0 5.8 .8 72.4 79.0
MA;ET ECONOMIES 36188 3
. __ .___.= . =
. . _ . . .

La Incomput4ble.
Source; Metallgeaellschaft. Metal Statistics and World Bureau of dMs, World Metal Statistics (actual).

H-
February1981 II-8

C. Trade

7. World exportsof bauxite (TableII.6)have grownat 5.3 percentper

year between1960 and 1977, lowerthan that of bauxiteproduction(7.7percent
per year), reflectingincreasedprocessingin bauxiteproducingcountries.
The main exportingcountriesare Guinea,Australia,Jamaica,Surinameand
Guyana,accountingin 1978 for over 75 percentof world trade.
8. The industrialized
countriesaccountfor most of the world'sbauxite
4iports,83 percentin 1978;but the CentrallyPlannedEconomies,where bauxite
productionhas stagnated,have been increasingsubstantially
theirimportsof
bauxite (TableII.7),at an annualrate of 10.2 percentbetween1960 and 1977.
9. The industrialized
countriesare net importersof primaryaluminum
(TablesII.8 and 11.9). In 1979, the UnitedStates'net importsamountedto
7 percentof its consumption,
Japan'snet importsamountedto 41 percentand
thoseof the EEC to 24 percent. These ratiosshouldincreaseover time due to
the lack of cheap electricalenergyfor new aluminumprojects. Net importsof
aluminumin the CentrallyPlannedEconomiesrepresented
in 1979 less than 4
percentof their consumption.Duringthe last decade,major increasesin
aluminum exports have taken place in North Africa and the Middle East (Bahrain
and Egypt), Latin America and the Caribbean (Venezuela) and New Zealand,
reflecting the startup of new operations in those areas.
 Table II.6: BAUXITE/a - WORLDEXPORTSBY MAINCOUNTRIESANDECONOMIC
REGIONS 4

ACtua1 Growth Rates

1960 1965 1970 1975 1977 1978 /b 1960-77

----------------- (million tons) …----- --(Z per annum)--

IndustrializedCountries 383 993 4.020 8.145 7,486 8,C03 22.4

of which: Australia 30 620 3,834 7,966 7.306 6,422 38.3
DevelopingCountries 14,994 19,282 23,138 24,191 26,463 26,970 3.6
Africa,South of Sahara 937 713 1.601 8,250 11,077 11.300 iO-.4
of which: Guinea 705 244 811 7,269 10,100 10,300 29.4
South Africa 0 0 0 0 0 0 /c
North Africa & Middle East 0 0 0 0 0 0 TC
Asia and Pacific 1,161 1,606 2,126 1,736 1,714 1,570 2.3
of which: Iadia 93 63 55 14 26 30 -12.7
Latin America6 Caribbean 11,168 14,639 16,144 11.327 11,214 11,500 0.6
of which: Jamaica 4,214 6,893 7,125 5,482 6,090 6.000 1.6
Suriname 3,634 4,369 3,420 2.249 2,114 2,300 -2.5
Guyana 2,129 1,786 3,052 2,154 1,659 1,700 1.9
Brazil 2 2 3 iB 4 0 9.8
SouthernEurope 1,728 2,324 3,267 2,878 2,458 2,600 2.4

CentrallyPlannedEconomies 499 499 660 603 639 700 0.3

WORLD TOTAL 15,876 20,774 27,818 32,939 34,588 35.670 5.3

MARKET ECONOMIES 15,377 20,275 27,158 32,366 33,949 34,970 5.4

La Gross weight.
lb Preliminary. H
IC Incomputable.

Source: UNCTAD
arl World Bank, EconomicAnalysisand ProjectionsDepartment.
 0
I-A
~0
Table 11.7: BAUXITE/a - WORLD IMPORTSBY MAIN COUNTRIESAND ECONOMICREGIONS

Actual Growth Rates

1960 1965 1970 1975 1977 1978 Lb 1960-77

------ -- ('000 tons)…------ ------- per annum)---

Industrialized
Countries 14,487 18,144 24,526 27,377 30.212 29,200 4.9

DevelopingCountries 95 259 561 462 423 454 9.5

Africa.Southof Sahara 0 8 14 32 is
T13 Ic
of which* SouthAfrica 0 8 14 32 13 15 Tc
North Africa & Middle East 5 3 1 2 3 3 -0.8
Asia & Pacific 25 105 126 114 163 170 5.0
Latin America& Caribbean 41 54 69 83 82 86 4.9
SouthernEurope 24 89 351 231 162 180 13.9
CentrallyPlannedEconomies l.0c3 1.380 2,480 4,926 4.932 5,500 10.2

WORLD TOTAL 15,635 19,783 27,567 32,765 35.567 35,154 ,

HARKET ECONOMIES 14,582 18,403 25,087 27,839 30,635 29,654 5.0

/a Grossweight.
/b Preliminary.
Icincomputable.

Source: UNCTADand World Bank, Economic Analysis and Projection Department.

l-
I-
 00

TableII.8: PRIMARYALUMINUH/a - WORLDMXPORTSBY MAINCOtUNTRIES REGIONS

AND ECONOMIC C

Actual Growth Rates

1960Lbi 1965/b 1970 1975 1977 1978Ic 1979Ic 1967-1977 1977-1979

----
--- ---- ('000tons)--------------- - _--(Z per annum)- -

InduatrlallzedCouatrles - - 2,033 2,189 2,617 2,994 2,677 4.7 1.1

of which: UnitedStates - - 370 169 89 102 163 -4.0 35.3
Com3umlty
EuropeanEconomdic - - 303 724 870 982 1,003 14.5 7.4
Japoak - - 6 84 100 55 a 55.0 -71.7

DevelopingCountries - - 284 467 549 583 S68 7.2 10.3

Africa.South of Sahara - - 148 174 200 21-2 T220 -6.-4 4.9
of which. South Afrlca - - O 14 28 37 29 51.6 1.8
North Africa6 Middle East - - 0 104 128 150 ISO 80.0 18.6
Asia& Pacific - - 3 0 5 5 0 -53.7 Jd
LatinAmerlca6 Carlbbean - - 55 26 66 67 so 1.0 10.1
SouthernEurope - - 78 163 150 149 159 7.3 3.0

CentrallyPlannedEconomies - - 477 602 696 720 613 10.1 -6.2

WORLD TOTAL - - 2SJ794 3,258 3,862 4.297 ]Lb958 4-9 1.2

MARKET ECONWSIES - - 2,317 2,6S6 3,166 3,577 3,.345 5.1 2.8

aluminaandaluminum
a Unwrought alloys.
Not available.
/c Preliodnary,
/d Incomputable.

Source: Vorld Bureauof Metal Statistics,World Metal Statistics Fq

MetalStatistics
Metallgesellachaft,
 Table 11.9: PRIMARYALUMINUM
/a - WORLD IMPORTSBY MAINCOUNTRIESANDECONOMIC
REGIONS

Actual Growth Rates

1960 11965 lb 1970 1975 1977 1978 /c 1979 /c 1967-1977 1977-1979

- - ---- (0000 tons)-- ---- (1 per annum)---

Industrialized Countries - - 2.121 2,022 2.832 3 089 3.125 4.5 5.0

of which: Uaited States - - 318 415 611 686 517 0.6 -8.0
EuropeanEconomicCommunity - - 1.417 1,095 1,528 1,536 1,689 -0.3 5.1
Japan - - 258 378 534 740 748 11.9 18.3

DevelopingCountries - - 138 172 375 413 297 -5.9 -11.0

Africa. South of Sahara - - 49 2 0 0 0 -37.9 d
of which: Scuth Africa - - 49 2 0 0 0 -37.9 -Td
North Africa & Middle East - - 0 0 0 0 0 /d 7d
Asia & Pacific - - 3 7 120 155 160 -10.0 15.5
LatinAmerica& Caribbean - - 0 96 170 170 88 12.0 -28.0
Southern Europe - - 86 67 85 88 49 0.1 -24.1

'CentrallyPlannedEconomies - - 55 388 500 550 738 19.0 21.5

WORLD TOTAL - - 2,314 2.582 3,707 4.052 4,160 4.2 5.9

MARKET ECONOMIES - - 2,259 2,194 3,207 3.502 3.422 4.2 3.3

/a Unwrought aluminum and aluminum alloys.

/b Not available.
Jc Preliminary.
/d Incomputable.

Source: World Bureau of Metal Statistics, World Metal Statistics r-

Metal1gesellchaft, Metal Statistics.

***
February 1981 II-13

REFERENCES

1. Banks, Ferdinand E., "Bauxite and Aluminum: An Introduction to the

Economics of Nonfuel Minerals," Lexington Books (Lexington,
Massachusetts, 1979).

2. Metallgesellschaft,"Metal Statistics," (Frankfurtam Main, Annual).

3. U.S. Bureau of Mines, "Mineral Commodity Summaries" (Washington,D.C.,

1980).

4. World Bank, "Price Prospects for Major Primary Commodities," (Washington,

D.C., 1980).

5. World Bureau of Metal Statistics, "World Metal Statistics" (London,

October 1980).

Note: Exports and Imports on bauxite and alumina were obtained from
unpublished information from UNCTAD.
 February1981 III-1

III. THE STRUCTUREOF THE INDUSTRY

A. Organization

1. as an industrywhere
The aluminumindustrymay be characterized
verticaland horizontalintegrationare predominant.From its beginningsin
1886 throughthe firsthalf of this century,the industrywas dominatedby
two integratedfirms: the AluminumCompanyof America (AICOA)and Pechiney
(France).
2. Presently,over 60 percentof the world productivecapacityfor
bauxiteand aluminaand over half of the world aluminumcapacity1/ is
operated by six corporations: Aluminum Company of America (ALCOA), Alcan
Aluminum Ltd., Reynolds Metals Company, Kaiser Aluminum and Chemical Corpora-
tion, Pechiney Ugine Kuhlmann Group (PUK) and Swiss Aluminum Ltd. (Alusuisse)
(see Tables III.1- III.3). These corporations are mainly concerned with the
production of aluminum, its semimanufactures and manufactures, and connected
* activities,such as the generationof electricalenergyfor aluminumproduction
of bauxite/alumina/
and the operationof shippingfirms for the transportation
aluminum. Besides,PUK, Alusuisse and Kaiserhave also significant
interests
in other metals and chemical industries.

3. Apart from the six major aluminum companies, there are about 40 other
firms which account for about 25 percent of world production capacity. Most of
these producersare nonintegrated,and some of them are state-owned
companies
or companieswhere the statehas a decision-makingrole. TablesIII.1 to 111.3
of thesecompanies,listedafter the "big six."
show the most significant

4. The most importantbarriersto entryare accessto commercialbauxite

deposits,economiesof scale,high capitalcostsand proprietarytechnology.2/
The minimumefficientscale seemsto be 300,000metrictons per year for an
aluminarefineryand about 100,000metrictons per year for an aluminumsmelter.

1/ ExcludingCentrallyPlannedEconomies.

* !/From "PolicyImplications The World

of ProducerCountrySupplyRestrictions;
Aluminum Bauxite Market,"preparedby CharlesRiverAssociates,Inc., for the
National Bureau of Standards.
February 1981 III-2

Table III.1: COMPANY CONCENTRATIONIN BAUXITE MINING, 1977

Capaci4tyz b sham sfaew

Cumsuative
conwmay (Mtpa) ff*i

Akoa 20.8 22.0 22.0

Kaiser 12.5 13.2 3S.2
Alcan 6.4 6.8 42.0
Rio Tinto Zinc 6.2 6.6 48.6
Reynolds 5.7 6.0 54.6
Alusuisse 4.6 4.9 59.5
Pechiney 4.6 4.9 64.4
Guyanagovernmentinterests 4.0 4.2 68.6
ErgoinvesttYu;oslavia) 3.5 3.7 72.3
PTTimah(Govetnment t*f Indonesm) 1.3 .4 73.7
Notanda 1.2 1.3 75.0
Martinmariettu 1.2 1.3 76.3

/a Including proportionate share of capacity in joint-ventureprojects.

/b Capacity figures reflect equity ownership or control; actual disposal of
bauxite may differ.
Source: UNIDO, Mineral Processing in Dev,elopingCountries.

Table III.2: COMPANY CONCENTRATIONIN ALUMINA REFINING, 1977 -

Capeefrtys Sh. Onumddive$*Wre

Cbmp. y AotteMDJ IL (%J

Alo S 22.4. 22.4

Aka .0 9.9 32.3
Rcraols 2. 9.6 41.9
Kaiser 2.9 9.6 51.5
pechiney 2.6 8.6 60.1
Alusui,se 1.6 5.3 65.4
YAW (Geanuny.Federl Republicoi) 1.0 3.3 68.7
EFIM (Italy) 0.9 3.0 71.7
Non LightSetal 0.9 3.0 74.7
Switomo 0.8 2.6 77.3
RioTinto Zinc 0.6 2.0 79.3
Ergomnes (Yugoslavia) 0.6 2.0 81.3

/a including proportionateshare of joint-ventureprojects.

Source: UNIDO, Mineral Processing in Developing Countries.

February 1981 III-3

Table III.3: COMPANY CONCENTRATIONIN PRIMARY ALUMINUM SMELTING, 1977

Capecity Slum Cumuative shae

COMPaY (Mt a) (a,) (fo)

Akan 1766 13.1 13.1

Acoa 1 752 13.0 26.1
Reynolds 1262 9.4 3S.5
Kaiser 1 0S6 7.8 43.3
Pechiney 914 6.8 50.1
Alusutse 704 S.2 55.3
VAW(Germany.FederalRepublicof) 4S0 3.3 58.6
Sumitomo 439 3.3- 61.9
NipponLight %fetal 400 3.0 64.9
Mitsubishi 358 2.7 67.6
Anaconda (Arco) 328 2.4 70.0
Rio TimtoZinc 282 2.1 72.1

Source: UNIDO, Mineral Processing in Developing Countries.

Consideringabout US$5,000/metric tons for an integrated complex (from mine to

smelter) the total capital investment required for a plant capacity of 150,000
metric tons per year of aluminum would be around US$750 million (in 1980
dollars).
5. Although industrial concentrationin the aluminum industry remains
high, it seems to be decreasing slowly over time. Langton 1/ anticipates that
over the next four years the amount of western world production accounted for
by independentaluminum smelters will nearly double to about 8.5%. The growing
use of scrap also provides a source of metal which is not tied to vertically
integrated systems. According to Langton, the deconcentrationof the industry
may be the most significant structuralchange in the sector during the 1980s,
a trend which is already being reflected in the two tier pricing system (see
para. 10).

1/ Langton, Thomas G., "Economic Aspects of the Bauxite/Aluminum Industry,"

Chase Econometrics,June 25, 1980.
February 1981 III-4

6. Bauxiteand aluminumproducersare activelyinvolvedin several

international organizationsat both governmentand noi *government levels.
Eleven bauxite producing countries conform the International Bauxite Associa-
tion (IBA): Australia, Dominican Republic,
Ghana, Guinea, Guyana, Haiti,
Indonesia,Jamaica,SierraLeone,Surinameand Yugoslavia.1/ The IBA holds
meetingsregularlyto discussissueson bauxitepricingand controlof produc-
tion facilities.Besides,bauxiteis includedin the UNCTADIntegrated
Programmefor Commodities.Most of the aluminumproducingcompaniesare
membersof the International
PrimaryAluminumInstitute(IPAI),which aims at
the promotionof understandingthe aluminumindustry. The OECD has an ad hoc
committeeon aluminum,which studiesthe industryprospects.2/

B. Marketing

7. Due to vertical integration, most bauxite is traded internally,

within the six major aluminum companies including its subsidiaries and affil-
iated companies. In 1976, about 90 percent of total trade of bauxite and about
83 percentof total tradeof aluminaoccurredthroughintrasystem transfer. No
similar data is available for aluminum, but it is estimated that a higher per-
centage is traded through open markets.

8. Due to the preponderance of internal trade of bauxite and alumina

withinthe companies,thereare no indicativemarket pricesfor theseproducts.
Transferpricesof bauxiteare set by the companiesas a functionof theircosts
of production and taxes, and therefore, vary widely within deposits. Prices for
bauxite and alumina are kept highly confidential, but may be estimated from
statistics on international trade.

9. Although the major aluminum companies process their aluminum into

semimanufactures, they sell significant quantitites to non-integrated producers.

1/ In 1978, these countries accounted for 74% of the world bauxite production
and practically all exports.

2/ From Hashimoto,Hideo,"BauxiteProcessingin Development Countries,"

December1980.
February1981 III-5

The pricesare set by the companies,presumablytakinginto accountlong-term

marketconditionsas well as productioncosts. The most sigaificantproducer
quotationsare ALCAN'sexportprices,due to its preponderancein world markets
and ALCOA'sproducerprices,due to the importanceof the U.S. market.
10. SinceOctober1978, aluminumwas introducedin the LondonMetal
Exchange,thereforecausingthe appearanceof a new quotationof aluminum,much
more volatilein naturethan the producerprices,reflectingshort-termfluctua-
tions in the industry.

11. In the seventies,taxationhad increasedsubstantiallyin many bauxite

producingcountries. The leadingcountrywas Jamaica,which in May 1974 imposed
a new tax systemconsistingof a standardroyaltyof 50 Jamaicancentsper long
dry ton of all the bauxitemined and a productionlevy on bauxiteequivalentto
7.5% of the averagerealizedpriceof primaryaluminum(in aluminumcontent).
This actionraisedtaxes in that year from under US$2 to aroundUS$14 per dried
ton of bauxite. 1/ Jamaica's lead in increasing taxation was followed by other
producers. The Dominican Republic, Haiti, Suriname, Guyana, Sierra Leone, Guinea
and Indonesia, also raised their taxes, the first four of these introducing
productionleviessimilar to Jamaica's. Guinea introduced a variant, whereby
the levy is also linked to the realized ingot price,but varieswith the quality
of the ore resultingin a significantly lowerrate. During1980,Jamaicaand
otherbauxiteproducersare consideringsome reductionsin their levieson
bauxiteproductionin order to attractnew investments.

12. Most of the major consumingcountriesprotecttheirdomesticproduction.

Table III.4,showstariffson bauxite/alumina/aluminum for major industrialized
countries. It may be seen from that table that thesecountriestend to impose
significantlyhighertariffson aluminum/ingot and aluminumfabricatedproducts,
permittingthe existenceof plantswhichoperateat relativelyhigh costs.

1/ Mining costsin Jamaicawere estimatedat US$6/metricton, thus, the levy

had a major impacton the priceof bauxitewhich rose fromUS$12.50/metric
ton in 1973 to US$23.20/metric
ton in 1974. (Cif.,U.S., importprice).
February 1981 III-6

Table III.4: POST-KENNEDY ROUND TARIFFS ON

BAUXITE, ALUMINA, ALUMINUM

Commodity and SITC Member United States EEC Japan

------------------------ In Advalorem Equivalent, %----------…---------

…

Bauxite, 283.3 0 0 0

Alumina, 513.6 0 5.6 0

Aluminum unwrought 684.1 4 5.8 10.4

Aluminum wrought 684.2 9.1 16.0 13.6

Source: UNIDO, Mineral Processing in Developing Countries,1980.

0
February 1981 III-7

REFERENCES

1. Charles River Associates, "Policy Implicationsof Producer Country Supply

Restrictions: The World Aluminum Bauxite Market," (prepared for
the National Bureau of Standards), (Cambridge,Massachusetts, 1977).

2. Hashimoto, Hideo, "Bauxite Processing in Developing Countries," Draft,

World Bank, December 1980.

3. H.P. Drewry (ShippingConsultants),"The Structure of Bauxite/Alumina

Trade and Trends in Ocean Transportation," (London, 1980).

4. Langton, Thomas G., "Economic Aspects of the Bauxite/AluminumIndustry";

paper presented to the International Symposium on the Bauxite/
Aluminum Industry in the Americas at Kingston, Jamaica, June 25,
1980.

5. Organization for Economic Cooperation and Development, "Industrial

Adaptation in the Primary Aluminum Industry," (Paris, 1976).

6. United Nations Conferences on Trade and Development, "Considerationof

InternationalMeasures on Bauxite," (Geneva, 1978).

7. UNIDO, "Mineral Processing in Developing Countries," (Vienna,October

1980).

and Prospects
8. Vedavalli, R., "Market Structure of Bauxite/Alumina/Aluminum
for Developing Countries," World Bank 1977.

9. World Bank, "Price Prospects for Major Primary Commodities," (Washington,

D.C., 1980).
February1981 IV-1

IV. ECONOMICPARAMETERSFOR MARKETANALYSISOF THE

BAUXITE-ALUMINUMINDUSTRY

A. Demandand SupplyElasticities
1. Few studiesprovideestimatesof elasticities
for bauxite/aluminum.
Table IV.1 summarizesthe information
currentlyavailable. Demandelasticities
have been estimatedthrougheconometricmodelsby Banks,1/ Pindyck2/ and
Woods and Burrows3/. Becausesupplyelasticities for bauxiteand aluminum
are not availablein the literature,some estimatesare providedby analyzing
cost of productiondata for new projectswhich would come on streamwithin the
decadeof the eighties.
2. The price elasticityof world demandfor bauxite/aluminum
is reported
by Banksas -0.13 in the short-runand -0.80 in the long-run. Also, Woods and
Burrows,of CharlesRiverAssociates,reportfor the U.S. price elasticities
of demandof -0.12 in the short-runand -0.726in the long-run. For the EEC
and the rest of the world, they reportlong-runelasticities
of -0.108and
-0.168respectively.These estimatessupportthe hypothesisthat aluminum
priceshave littleImpacton demandin the short run, but seem to affectit
more in the long-run. However,cautionshouldbe exercisedin the use of the
priceelasticityvaluesprovidedhere,due to the relativelyhigh standard
of
of the estimates. At a 95% confidencelevel priceelasticities
deviations
demandfor aluminumrange from -0.03 to -0.21 in the short-runfor the U.S. and
-.1963 to 1.256in the long-runfor the U.S. The rest of the price elasticity
differentfrom 0 at a 95%
estimatesby Woods and Burrowsare not significantly
confidencelevel. The other authorsdo not reportthe necessaryinformation
to evaluatethe goodnessof their estimates.

1/ Banks, Ferdinand, "Bauxite and Aluminum: An Introduction to the Economics

of Nonfuel Minerals," Lexington Books, Massachusetts, 1979.

2/ Cited in Banks (op. cit.)

3/ Woods, Douglas and James Burrows, "The World Aluminum Bauxite Market",
A CharlesRiverAssociatesResearchPaper,Praeger,New York, 1980.
February 1981 IV-2

3. Table IV.1 shows the demandelasticityof aluminumwith respectto

industrial production for different countries as estimated by Woods and
Burrows. These run from a low 0.98 for the EEC to a high 2.1 for the rest of
the world, indicating that aluminum consumption, other things being equal,
grows on the average at about 50 percentmore rapidlythan industrial produc-
tion.

4. The price elasticityof supplyis roughlyestimatedas 1.6 for

bauxite,while that for aluminumrangesfrom 1.5 to 2.7. As mentionedin
para. 1 above,theseestimatesare based on the priceswhich would be necessary
to bring on streamnew projects(at a reasonableprofit)in order to satisfy
world demandduring the decadeof the eighties. These valuesreflectthe
higher costs of operating new mines as well as adjustments for a decrease in
ore qualityin the case of bauxite,and the increasein the price of hydro-
electricpower requiredfor smeltingin the case of aluminum.

B. PriceDetermination
Mechanisms

5_ Most aluminumingotsare tradedat the producers'prices. The major

aluminumproducerspost a list price for theirproduct,which is changed
infrequently,and which reflectspresumablylong-runaveragecosts and other
long-runfactors.1/ However,actualtransaction
prices set by the producers
are generatedfrom the list price and a premiumof discountdeterminedby the
extent of shortage or surplus prevailing in the market.
6. Woods and Burrows2/ suggestthe followingsimplemodelwhich
determines consumption, prices and scrap recoveries:

1/ Woods and Burrows,op. cit.

2/ op. cit.
February 1981 IV-3

Table IV.1: ELASTICITIES FOR BAUXITE/ALUMINUM

Short Run Long Run

Price Elasticlty of Demand

(Bauxite-Aluminum)

World
- Banks -0.13 -0.80
- Pindyck L -0.20 -1.00

United States
- CRA /2 -0.12 -0.726

European Economic Commiaty

- CRA /2 -0.108

Rest of World
- CRA /2 -0.168

Cross Price Elasticity of Aluminum

With Respect to Copper

United States
- CRA /2 0.023 0.209
European Economic Couwnity
- CR1 /2 0.246

Rest of World
-CRA/ 2 0.166
Demand Elasticity vith Respect
to Industrial Production

United States
- CPA /2 1.49

European Economic Community

- CRA /2 0.979
Japan
- CRA /2 1.45

Rest of World
- CRA /2 2.133

Supply Elasticity with Respect

to Price

Bauxite /3 1.6
Al1umitaj /3 1.5 - 2.7

/1 Cited in Ranks.
Refers to the Charles River Aesociates Report by Woods and Burrows.
R
/ Own calculatlons based on cost of production estimates for marginal
projects.

Sources: Banks, Ferdinand, "Bauxite and Aluminum: An Introduction to the

Economies of Nonfuel Minerals," Lexington Books, Massachusetts, 1979.
Woods, Douglas ane James Burrows, "The World Aluminum Bauxite Market,"
A Charles River Associates Research Report., Praeger, New York, 1980.
February 1981 IV-4

0
D - fl (PT, Y) (1)
So - f2 (PS, Vo) (2)
SW m f3 (PS, Vn, D) (3)
DN - D -SO - SN (4)
PL = f4 (C, K, DN,X) (5)
PT
P = f5 (DN, K, Z) (6)

PS = f6 (PT, Q) (7)

where: D = consumption
PT = transactionprice
Y - exogenous variables affecting
the demand for aluminum
SO = old scrap recovery
PS - price of scrap
VO = exogenous variables affecting the supply of old scrap
SN - new scrap recovery
Vn = exogenous variables affecting the supply of new scrap
DN - net consumption of primary aluminum
PL = list price of aluminum
C long-run average cost of production
K - total capacity
X = exogenous variables affecting the list price
PT - transaction price of aluminum
Z - exogenous variables affecting the transaction price
Q = exogenous variables affecting the price of scrap.

According to this formulation,during periods of surplus aluminum capacity, the

transactionsprice is determinedby the extent of the price discounting offered
by primary producers. Scrap being a substitute for primary aluminum ingot, its
price will adjust to be consistent with the transaction price of primary aluminum.
During periods of shortage, the transactionsprice will rise above the list price,
the scrap price will also rise and secondary supply will be increased. The trans-
actions price must rise by enough to equate the excess demand to the increase in
output from scrap. Primary supply does not appear directly in the model, being
set equal to consumption of primary aluminum.
 February 1981 IV-5

REFERENCES

1. Banks, Ferdinand, "Bauxite and Aluminum: An Introductionto the Economics

of Nonfuel Minerals" (LexingtonBooks, Massachusetts,1979).

2. Woods, Douglas and James Burrows, "The World Aluminum Bauxite Market,"
A Charles River Associates Research Report (Praeger,New York 1980).

0
 February1981 V-1

V. MARKET
PRICES FOR BAUXITE,ALUMINA
ANDALUMINUM

A. Bauxite
1. Bauxiteis not an homogeneouscommodity.Differencesinclude
physicalqualities,chemicalcomposition,impurities,
humidityand the per-
centageof recoverablealumina. Besides,aluminarefineriesare not equipped
to treatall typesof bauxite. Therefore,bauxitepricesrefer to a specific
type. SamuelMoment1/ studiedbauxitepricingfor the 10 major Western
bauxiteproducingcountries,findingfive types of marketrelationsips
between
producingcountriesand consumersin determiningprice levels:

"(a) Pricesmay be determinedbetweeninvestor-owned

producercompaniesand unrelatedconsumers,as
in Australia. Such prices are used by others
as standardsto be met by the competition.

(b) Pricesmay be determinedby government-owned

producingenterprisesin contractswith inde-
pendentconsumers,as in Guyanaand Indonesia.
Thesepricesalso are used by othersas stan-
dards to be met by the competition.
(c) r.icesmay be determinedor approvedby govern-
ments under laws and throughcontractswith
consumersas in the DominicanRepublic,Suriname,
Guinea and Brazil. A principal purpose in such
prices is to produce revenues for governments
throughtaxes and levies.

(d) Prices may be determined between investor-owned

producing companies and their affiliated companies
under common ownership as in Jamaica, Sierra Leone
a

* 1/ Moment, Samuel, "The Pricing of Bauxite from Principal Exporting Countries,

1974-1978, UnitedNationsIndustrialDevelopment Organization, Vienna,
Austria.
February 1981 V-2

and Haiti. C'overnmentsdo not in these cases fix

the bauxite prices but affect them through the
level of taxes aLd levies. Since the buyers and
sellers are under common ownership, bauxite
prices are at time& determined so as to keep to
a minimum the combiaed taxes paid in the pro-
ducing country and the consuming country, as
affected by the laws of each country.

(e) Prices are also affected as between all buyers

and sellers by different conditions governing
long-term and short-term or spot agreements.
Long-term agreements relate prices to total
costs and profits for the seller. Short-term
agreements or spot transactions relate prices
to temporary conditions affecting either buyer
or seller..." 1/

Therefore, the differences in the costs of extracting the alumina as affected

by the qualities of the bauxite, the market relationshipsbetween buyers and
sellers, and the incidence of transport costs to the points of consumption of
the bauxite, may lead to considerabledifferences among the various price
levels.

2. There are no posted or list prices for bauxite due to the variety
of conditionsaffecting its value (see para. 1), the lack of a market for
small volumes, and the fact that the bulk of world bauxite trade is either
within integrated companies o. through long-term agreement between buyers and
sellers. Bauxite prices may be obtained from trade sources (customsdata and/
or internationaltrade statistics) or may be estimated as a function of costs
of production. Both types of price figures do not seem to be totally appro-
priate. Prices obtained from trade sources reflect, to a great extent,

1/ Moment, op. cit., page 3.

February1981 V-3

intracompany
trading,where these companiesestablishthe priceof bauxitefor
theirinternalaccountingto minimizetaxesas well as for otherpurposesof
companystrategy. Pricesestimatedas a functionof costsor production,on
the otherhand, do not take into accountmarketconditionsalthoughthey may
be consideredas reflectinglong-termtrends.

3. The World Bank estimatesbauxitepricesbased on productioncosts,

throughthe followingformula:1/

B (P x a b) + R + C
Bx ALM
where
P = Realizedaluminumingotprice ($/ton)

PB deliveredbauxiteprice of Jamaicanbauxite
Bx to the U.S. coast ($/ton)
R - royalty ($/ton)
a - levy rate (%)
b = conversionfactor
C = generalcosts (mineoperationand ca- -1 costs,
and transportation
cost to the U.s. t).

World Bank'sbauxitepricesfor 1960-1980are shownin TableV.1.

4. The studyby S. Moment / cited in para. 1, gives a comprehensive

view on bauxite pricing and prices. Moment has compared prices for Jamaican
bauxite from four different sources: the U.S. Bureau of Mines, the Inter-
national Monetary Fund, the Jamaica Bauxite Institute and the World Bank.
These are shown in Table V.2. The same author has compiled approximate bauxite
prices for 1977 for shipmentsfrom selectedcountriesto the U.S. and Japan,
which are reproducedin Table V.3.

1/ See World Bank, "PriceProspectsfor Major PrimaryCommodities,"

January
1980.
2/ Op. cit.
February 1981 V-4

Table V.1: BAUXITE PRICES, WORLD BANK ESTIMATES, 1960-1980

(CIF, $/ton) /a

1977
Current Constant
$ '$

Actual

1960 7.5 19.1

1961 7.5 19.0
1962 7.5 19.2
1963 7.5 19.1
1964 7.5 18.8

1965 7.5 18.2

1966 12.0 29.0
1967 12.0 28.6
1968 12.0 30.5
1969 12.0 30.2

1970 12.0 27.3

1971 12.0 25.2
1972 12.0 22.8
1973 12.5 19.7
1974 23.2 29.4

1975 25.3 27.8

1976 27.2 29.3
1977 30.8 30.8
1978 34.3 29.6
1979 36.6 27.9
1980 41.6 27.3

/a US Import reference price based on imports from Jamaica.

Source: World Bank, Economic Analysis and Projections Department (actual).

February 1981 V-5

Table V.2: PRICES OF JAMAICABAUXITE IMPORTEDINTO THE UNITED STATES

1972-1977, U.S. DOLLARSPER METRIC TON

International Jamaica
U.S. Bureau Monetary Bauxite World
of Mines Fund Institute Bank
Year 1/ 2/ 3/ 4/

1972.......... 13.27 11.93 11.94 12.00

1973.......... 13.07 10.00 11.84 12.50

1974.... . ... 18.32 16.27 23.50

1975........... 22.15 21.46 19.81 25.30

1976............ 25.44 21.73 19.72 27.20

1977............ ... 18.65 34.19 30.80

1/ Minerals Yearbook, U.S. Bureau of Mines. Adjusted by U.S. Bureau of Mines

to dry basis per long ton, 1972-1975, and converted to metric ton values.
1976 value is on a wet basis.

2/ Calculated from InternationalFinancial Statistics, InternationalMonetary

Fund, December, 1978, p. 206, value of Jamaica bauxite exports in Jamaica
dollars, converted at official exchange rates. U.S. dollars per Jamaica
dollar: 1.25 in 1972 and 1.10, 1973-1978. Export tonnages from Jamacia
Bauxite Institute.

3/ Calculated from export tonnage and values in Jamaica dollars as reported by

the Jamaica Bauxite Institute to the U.S. Embassy, Kingston, converted into
U.S. dollars per ton at official exchange rates, U.S. dollars per Jamaica
dollar: 1.25 in 1972 and 1.10, 1973-1978.

4/ Commodity Trade and Price Trends (1978 edition), Economic Analysis and
Projections Department, World Bank, p. 98, "U.S. Import Reference Price Based
on Imports From Jamaica."

Source: Moment, Samuel, "The Pricing of Bauxite From Principal Exporting

Countries, 1974-1978," UNIDO, Vienna, Austria, 1979.
 Febrt2ry 1981 V-6

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Pam aspatouLy. notlad" . sommi tm" to AU A-fesze m uc
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 February 1981 V-7

B. Alumina
5. Although a limited amount of alumina is traded in spot markets,
aluminapricesare consideredhighlyconfidential.S. Moment,1/ using data
on importsfrom the U.S. Bureauof the Census,computedaveragepricesat the
U.S. for aluminashipmentsfrom Guyana (GUYBAU),Suriname(ALCOA),and Jamaica
(ALCOA). These are shown in Table V.4. The lowerprices obtainedby GUYBAU
from Guyanareflectits dependenceupon short-termsalesduringa periodof
inactivemarkets,as well as the fact that long-termarrangementsfor alumina
to other typesof sales
to serveexistingsmeltersofferlimitedopportunities
contracts.2/

C. Aluminum

6. Producerpricesare the prevailingpricingsystemfor aluminadue to

the high degreeof integrationin the aluminumindustry(about80% of primary
-SK aluminumproductiongoes from the primaryproducerto a subsidiaryproducing
semifabricates.) The basicworld producerprice is Alcan'swhich is the
world'slargestexporter. The list price of majorUS producersis widelyused
becausepresumablyit reflectslong-termtrends. Producerpricesdifferin
differentcountries,due to limitedcompetitionand becauseof tradebarriers.
Besidesproducerprices,thereare dealeror free marketprices,which are
regularlyquotedin tradejournals. The MetalsWeek U.S. marketprice for
aluminumand the MiningJournal'sFree Marketprice for aluminumare commonly
used pricequotations.The LondonMetal Exchange(LME)introducedan aluminum
contractfor cash and 3-monthcontractsduring1977-1978. Dailymetal LME
quotationsare cited in most tradejournals. The main pricingsystemsfor
aluminumare summarizedin Table V.5.

7. and ExportProjections
The World Bank (Commodities Division, Economic
Analysisand ProjectionsDepartment)uses generallythe U.S. Major Producer

* 1/ Moment,Samuel,op. cit.

2/ Ibid.
 Table V.4: AVERAGE PRICES OF ALUMINA AT THE U.S. FOR SHIPMENTS FROM DIFFERENT COUNTRIES

co
---------------------- (US dollars per metric ton)------ -

From Guyana (GUY BAU) From Suriname (ALCOA) From Jamaica (ALCOA)
at Mobile, Alabama at Norfolk, Virginia at Norfolk, Virginia
FOB CIF FOB CIF FOB CIF
price price price price price price

1974 62.43-81.02 72.33-88.52 72.10-76.00 77.50-80.54 72.75-90.00 73.96-91.30

1975 73.50-88.18 82.60-103.65 108.34-123.34 109.73-124.82 90.00-144.92 91.30-146.53
1.976 69.78-81.00 ...-92.48 133.61 134.86 88.13-156.69 89.24-157.90
1977 82.54-92.48 90.37-108.31 141.03-152.61 142.29-153.88 140.00-183.73 141.22-185.05

Source: Moment, Samuel, "The Pricing of Bauxite from Principal Exporting Countries, 1974-1978,"
Vienna, Austria, 1979. Data originally in US dollars per long-term ton converted to
US dollars per metric ton.
c
 v-9
February1981
0

TableV.5: MAIN PRICINGSYSTEMSFOR ALUMINUM

Producer Prices Description Sources

ALCAN - World Price, Aluminum,virgin ingots, Metal Bulletin

US$/metricton from Canadato Hong Kong
and RotterdamCIF

US major producer List price of major US MetalsWeek

producers99.5%pure

Kaiser CIF main ports Metal Bulletin

Producerpricesfrom CIF main ports Metal Bulletin

various countries
0
Free MarketPrices

LondonAluminum (99.5%) Free market MiningJournal

MW U.S. market MetalsWeek canvasof MetalsWeek

dealers/producers/Consumers

ExchangeMarket Prices

LME aluminum,cash and Primaryaluminum Major trade

3-months of minimum99.5% journals
purity (quoted daily)

0~~~
._._
February1981 V-10

Aluminumprice fromMetalsWeek and the LondonAluminumFree Market Pricefrom

MiningJournal. The formeris chosenas a representative
price for long-term
markettrends,while the latterreflectsshort-termconditions.
8. Table V.6 providesannualdata on primaryaluminumprices for both
the U.S. Major Producer(MetalsWeek) and the LondonFree Market (Mining
Journal). It may be observedfrol that table,the absenceof marketprice
fluctuationsduringthe fiftiesand sixtiesdue to the high degreeof integra-
tion prevailingin the industry,which permitteda balanceof the world supply
and demandof aluminum. In the seventies,this situationchanged. During 1971
and most of 1972,aluminumproducershad excesscapacitywhich forcedthem to
decreasetheirpricesby 6 to 7 percent. At the end of 1972 and up to the
firstpart of 1974, the worldeconomyhad a prosperousperiodwhich resulted
in a rapidly rising demand for aluminum. Both producer prices and market
prices increased considerably in current terms during that period. Producer
pricesin the U.S. rose from an averageof US$582.permetric ton in 1972
to US$752per metric ton in 1974. However,aluminumpricesdid not recover
in constantterms to the levelsprevailingin the sixties. Althoughthe 1974
world recessionhad a negativeimpactin the demandfor aluminum,the industry
resortedto cutbacksin productioninsteadof loweringprices. The free
marketpricesdroppedsubstantiallybut the main producersmaintainedtheir
postedprices. After 1976,consumptionof primaryaluminumhas been recover-
ing, and exceptfor a recessioninduceddeclineduringthe end of 1980 and
part of 1981,it is expected to continue along a rising path into the mid-
eighties. This is being accompanied by a substantialincreasein current
producerpricesfrom about US$877/mtin 1975 (40 US<-per pound)to US$1,531/mt
in 1980 (69 USq per pound). However,in constantterms,aluminumpricesremain
substantially
lowerthan thoseof the sixties(seeTable V.6).
e

February 1981 V-ll

Table V.6: PRIMARY ALUMINUM PRICES 1950-1980

(US$/metricton)

U.S. Producer Price /1 London Market /2

Year Current 11977 Constant $ Current $ 1977 Constant

1950 390 1,277 314 965

1951 419 1,155 342 886
1952 428 1,152 429 1,084
1953 461 1,294 432 1,139
1954 480 1,372 430 1,154

1955 522 1,471 460 1,217

1956 530 1,442 524 1,338
1957 560 1,472 543 1,340
1958 547 1,428 508 1,246
1959 545 1,423 497 1,218

1960 573 1,462 513 1,230

1961 561 1,420 513 1,221
1962 527 1,348 498 1,201
1963 499 1,273 499 1,196
1964 523 1,311 526 1,244

1965 540 1,314 540 1,238

1966 540 1,304 540 1,226
1967 551 1,312 544 1,216
1968 564 1,435 553 1,321
1969 599 1,509 587 1,388

1970 633 1,439 614 1,317

1971 639 1,342 626 1,242
1972 582 1,104 590 1,062
1973 551 869 669 1,010
1974 752 952 948 1,149

1975 877 963 686 722

1976 978 1,055 859 888
1977 1,132 1,132 995 957
1978 1,170 1,009 1,045 873
1979 1,310 998 1,538 1,135

1980 1,531 1,005 1,746 1,146

"mll
For 1950-59, primary pig; 1960 onwards unalloyed ingot, 99.5%, producer list price.
/2 99-99.5% ingot, spot price.

Sources: Metal Week (New York market)

Mining Journal (London market)
 February 1981 V-12

REFERENCES

1. American Metal Market (daily),American Metal Market (New York).

2. Banks, Ferdinand E., "Bauxite and Aluminum: An Introductionto the

Economics of Nonfuel Minerals," Lexington Books (Lexington,
Massachusetts, 1979).

3. Engineering and Mining Journal (monthly),McGraw-Hill, Inc., (New York).

4. Metal Bulletin (twice a week), Metal Bulletin Ltd., (London).

5. Metals Week (weekly),McGraw-Hill, Inc., (New York).

6. Mining Journal (weekly), The Mining Journal Ltd. (London).

7. Moment, Samuel, "The Pricing of Bauxite From Principal Exporting

Countries, 1974-1978,"United Nations Industrial Development
Organization (Vienna, 1979).

8. Woods, Douglas and James Burrows, "The World Aluminum Bauxite Market,"
A Charles River Associates Research Report, Praeger (New York, 1980).

9, World Bank, "Price Prospects for Major Primary Commodities,"

(Washington, D.C., 1980).

10. World Bank, "Commodity Trade and Price Trends," August 1980
(Washington,D.C.).
 February1981 VI-1

VI. SPECIALISSUES

A. Shipping

1. The shippingof aluminumraw materialsis an importantissuewhich

affectsconsiderablybauxiteand aluminaprices. Ocean freight,as well as
shippingand cargohandlingchargesaccountfor as much as 50% of the delivered
cost of bauxite. Apart from marketfactors,the levelof freightcharges
dependson shipmentdistance,the size of the shipment(vessel)and the type
of transportarrangements.Some aluminumcompaniesown their own vessels,
but they also supplementtheir transportcapacityby charteringships.

2. The size of the vesselexertsconsiderable

influenceon shipping
costs. The operatingcosts per ton of a 25 thousandtonnes,a 60 thousand
tonnesand a 110 thousandtonnesdry bulk carrieras comparedto a 15 thousand
tonnesship are 75, 53 and 39 percentrespectively.
1/ Therefore,aluminum
*sr companieswould choosethe largestvesselsize possible,if it were not for
port capacity. Long-haultradessuch as from Australiato WesternEuropeand
Guineato the U.S.A.,use carriersof 50 to 70 thousandtonnes. Approximately
two-thirds
of the international
seabornetradeof bauxiteand aluminais
shippedin carriersof more than 20 thousandtonnescapacity. Nevertheless,
shortroutescombinedwith shallowdraftsavailableat some ports,such as in
Guyanaand Suriname,make it convenientto employvesselsof no more than 20
thousandtonnes. Table VI.1 showsthe characteristics
of principalports
loadingbauxiteand alumina.
3. Bulk materials,such as bauxiteand aluminacan be handledmore
cheaplyper ton than aluminumand its fabricatedproducts. Accordingto
Blubaker2/ thesehighercosts reflectalso the greaterdiversityin destina-
tion of the metal as comparedwith the raw materials. Steamshiprates for
ingot,which are liner terms,tend to be 2-3 timesthe rate for bauxite/alumina.

1/ H.P.Drewry (ShippingConsultants
Ltd.),"The Operationof Dry Bulk
Shipping: Presentand Prospective
TradingCosts in the Contextof Current
and FutureMarketTrends". London,January1979.

2/ Brubaker,Sterling,"Trendsin the World AluminumIndustry,"for Resources

for the FutureInc.,JohnsHopkinsPress,Baltimore,1967.
February 1981 VI-2

Table VI *: PRINCIPAL PORTS LOADINGBAUXITE AND ALUMINA

EXPORTER TERMINAL(OPERATOR) MAX. SHIP REXAS

SIZE (DWT)

1. BAUXITE PORTS
Jamaica Ocho Rios (Reynolds) 60.000 Max. freeboard 5*'
Port Rhoades (Kaiser) 40.000 Max. length 660'

Haiti Miragoane (Reynolds) 45,000 One fixed shiploader

Dominican Republic Cabo Rojo (Alcoa) 50,000 Max. length 600'

Trinidad Chaguaramas (Alcan) 25,000 Transhipment terminal

Tembladora (Alcoa) 35,000+ Transhipment terminal

Suriname (1) aoengo (Alcoa) 20,000 Max. length 525'

Paramaribo (Panama) (Alcoa) 20,000
Smalkalden (Billiton) 20,000+

Guyana (I) Everton (Guybau) 15.000

Mackenzie (Guybau) 15.000 Max. length 570'

Brazil Porto Trombetas (MRN) 50.000

Australia Gove (Nabalco) 80,000

Weipa (Comalco) 60,000

Indcnesia Bintan (PN Aneka Tambang) 30,000 Terminal is at Kijang

Malaysia Telok Ramunia (Seaba) 25,000 Vessels must be

grabfitted

Ghana Takoradi (Baco) 25,000 Max. length 505

Sierra Leone Sherbro (Alusuisse) 35,000 Vessels must be

parbfitted

Guiea Conakry ([lndia) 25,000

Port mea (Walso) 70,000 Max. length 740'

Greece Ite 15.000

2. ALUMINAPORTS

Canada Port Alfred (Alcan) 60,000

US Corpus Christi (Reynolds) 45,000 Max. length 750'

Point Comfort (Alcoa) 45,000
Baton Rouge (Kaiser) 40,000
Graercy (Kaiser) 40,000

J-ica Port Kaiser (Alpart) 30,000

Port EAquivel (Alcan) 30.000

Trinidad Teabladora (Alcoa) 35.000 Transhipment terminal

Surlna Panm (Alcoa) 20,000

Guyana Mackenxie (Guybau) 15.000 Maz. size controlled

by bar draft

Australia Gladstone (QAL) 60,000

Kvinana (Alcoa) 45,000
Banbury (Alcoa) 40,000
Goe (Alusuisee) 80.000

Guinea CoQskry (Prialso) 25,000

Virgin Islands St. Croix (Martin Marietta) 30,000 One fixed shiploader

Italy Porto Vesm (Eurallumina) 60.000

W. Germany Stade (A0$) 80,000

(1) Max. size governed by bar draft; vessels of 25/30.000 DVT my part load and
top-up at the Trinidad transfer stations,

Source: H.P. Dreury (shipping consultants Ltd.), "The Structure of Bauxite/Alumina -

Trade and Trends in Ocean Transportation." London. August 1980.
February1981 VI-3

B. The International
BauxiteAssociation(IBA)

4. The International
BauxiteAssociation(IBA)was establishedin 1974.
Initiallythe Associationcomprisedsevenmembers,whichaccountedfor 67% of
the world bauxiteproduction:Australia,Guinea,Guyana,Jamaica,Suriname,
Yugoslaviaand SierraLeone. By the end of 1975,Ghana,Haiti,the Dominican
Republicand Indonesiahad also joinedthe IBA. The Association now accounts
for about 74 percentof world productionof bauxiteand 90 percentof world
trade.

5. The objectiveof the IBA as set out in its statutesare:

i. To promotethe orderlyand rationaldevelopment
of
the bauxiteindustry.

ii. To securefor member countriesfair and reasonable

processingand market-
returnsfrom tne exploitation,
ing of.bauxiteand its productsfor the economicand
of theirpeople,bearingin mind
socialdevelopment
the recognizedinterestsof consumers.

iii. Generallyto safeguardthe interestsof member

countriesin relationto the bauxiteindustry.

6. For the achievement of its objective,the Association'sCharter

encourages the following activities among its member countries:

"i. exchange of information concerning all aspects of

the exploitation, marketingand use
processing,
of bauxiteand its derivatives;

ii. endeavorto harmonizetheirdecisionsand policies

mining,processing
relatingto the exploitation,
and marketingof bauxite,aluminaand aluminum,
bearingin mind the need to ensurethat:

a) membercountries enjoy reasonable returns

from theirproduction;
February1981 VI-4

b) the consumersof thesecommoditiesare

adequatelysuppliedat reasonableprices;

iii. takeactionaimed at securingmaximumnational

ownershipand effectivenationalcontrolover
the exploitation
of this naturalresourcewithin
theirterritories and to supportas far as
possibleany such actionon the part of member
countries;
iv. endeavorto ensure that operationsor projected
operationsby multinational
corporationsin the
bauxiteindustryof one membercountryshallnot
he used to damagethe interestsof other member
countries;

V. conductjointlysuch researchas may be deemed

appropriatein theirmutual interests;

vi. explorethe possibilities of jointor group

purchasingof materialsand equipmentand of
providing common services to member countries
in theirmutualinterests."1/

C. The IntegratedProgramfor Commodities

7. Bauxite
(but not alumina nor aluminum) is one of the products
covered in the proposal for the Integrated Programme for Commodities sponsored
by UNCTAD. The integrated
programme seeks to deal with the problems of
commodities
as they affectdevelopingcountries,such as price fluctuations,
exportearningsinstability,lack of integrationin the economy,etc. The
integrated
programmecomprisesfive basic elements:

1/ International Bauxite Association, "Bauxite and the New International

Economic Order," in IBA Quarterly Review, Vol. 3, No. 1, September
1977, Kingston, Jamaica, 1977.
February 1981 VI-5

"i. The establishmentof internationallyowned stocks

covering a wide range of commodities.

ii. The establishmentof a common financing fund that

will make resources available for the acquisition
of stocks.

iii. The institution,when justified, of a system of

medium to long-term commitments to purchase and
sell commodities at agreed prices.

iv. The institutionof more adequate measures that

are at present available to provide compensatory
financing to producers to cover shortfalls in
export earnings.

v. The initiationof an extensive programme of

measures to further the processing of commodities
by the producing countries." 1/

By the end of 1980, the integratedprogramme had not yet been established and
preliminary consultationsfor bauxite were incipient.

D. United States Government Stockpile

8. The StockpilingAct of the United States Government provides that

a stock of strategic and critical materials be held to decrease dependence
upon foreign sources in times of emergency. The purpose of the stockpile is
to serve the interest of national defense only and is not to be used for
economic or budgetary purposes. The quantities of the materials stockpiled
should be sufficient to sustain the United States for a period of not less
than three years in the event of a national emergency. The stockpile goal as
of April 1980 for the aluminum metal group was 7.15 million short tons of

1/ Quoted from UNCTAD, "An Integrated Programme for Commodities and Indexation
of Prices," in Sauvant and Hasenpflug, editors, "The New International
Economic Order: Confrontation and Cooperationbetween North and South,"
Westview Press, Boulder, Colorado, 1977.
February1981 VI-6

aluminumequivalent(bauxitemetals grade,aluminaand aluminum)and for the

aluminumoxide abrasivegradesgroup it was 638 thousandshort tons of
aluminumoxide equivalent(bauxiteabrasivegrade and aluminumoxide). Table
VI.2 shows the government's
desiredinventorymix for thesetwo stockpile
groupsfor 1980.
 February 1981 VI-7

Table VI.2: U.S. GOVERNMENT DESIRED INVENTORY MIX FOR STOCKPILE GROUPS

Commodity Unit /1 Desired Inventory Mix

Aluminum Metal Group ST Aluminum 7,150,000

Alumina ST 0
Aluminum ST 700,000
Bauxite Metal Grade, Jamaica Type LDT 21,000,000
Bauxite Metal Grade, Suriname Type LDT 6,100,000

Aluminum Oxide, Abrasive Grade Group ST of Abrasive Grain 638,000

Aluminum Oxide, Abrasive Grain ST 0

Aluminum Oxide, Fused, Crude ST 0
Bauxite, Abrasive Grade LCT 750,000

ST - Short Ton, LDT - Long Dry Ton, LCT - Long Calcined Ton

/1 Conversion factors to aluminum metal: Bauxite Jamaica Type 0.231,

Bauxite Suriname Type 0.204, alumina 0.518. Conversion factors to
Aluminum Oxide Abrasive Grade: Aluminum Oxide Fused 0.85.

Source: Federal Emergency Management Agency, "StockpileReport to the

Congress October 1979 - March 1980," Washington, D.C., July 31,
1980.
February 1981 VI-8

REFERENCES

1. Brubaker, Sterling, "Trends in the World Aluminum Industry," for Resources

for the Future, Inc., Johns Hopkins Press (Baltimore, 1967).

2. Drewry, H.P., (Shipping Consultants Ltd.), "The Operation of Dry Bulk

Shipping Present and Prospective Trading Costs in the Context
of Current and Future Market Trends" (London,January 1979).

3. Drewry, H.P., (Shipping Consultants,Ltd.), "The Structure of Bauxite/

Alumina - Trade and Trends in Ocean Transportation" (London,
August 1980).

4. Federal Emergency Management Agency, "Stockpile Report to the Congress,

October 1979-March 1980" (Washington,D.C., July 31, 1980).

5. InternationalBauxite Association, "Bauxite and the New International

Economic Order" In: IBA Quarterly Review, vol. 3, no. 1,
September 1977, (Kingston,Jamaica, 1977).

6. UNCTAD, "An IntegratedProgramme for Commodities and Indexation of

Prices," in Sauvant and Hasenpflug editors, "The New Inter-
national Economic Order: Confrontationand Cooperation
between North and South," Westview Press (Boulder, Colorado,
1977).

is