China Hongqiao eyes African bauxite to secure supplies

China Hongqiao Group, the nation's largest non-state aluminium producer, is in talks to buy a bauxite mine in Africa to secure the raw material for 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 offtake for more than 20 to 30 years."

Hongqiao is seeking bauxite supplies after Indonesia, Southeast Asia's largest economy, 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 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 per cent to almost three million tonnes this year, she said. The plan may help Hongqiao become China's biggest aluminium smelter by output, surpassing Aluminum Corp, which plans to shut as much as one million tonnes of capacity out of 3.6 million tonnes.

Hongqiao has 16 million tonnes of bauxite stockpiles, enough for about 14 months, Wong said. It also has signed a three-year supply contract with Rio Tinto Group to buy at least three million tonnes annually from Australia and has supply agreements with India, she said.