In 2015, our Managing Director Paul Adkins predicted that by 2018 Malaysia’s bauxite export bonanza will be dead or close to dead. But we were out by a year – it’s now looking like Malaysia’s bauxite activity will die this year.
Since Indonesia banned its ore exports including bauxite in 2014, Malaysia’s bauxite exports to China started in 2014 and surged in 2015 with the volume of 24 million tons. Malaysia became to be the largest bauxite supplier to China in 2015.
The large volume of bauxite export caused pollution issues for the local environment. Red dust from bauxite transportation polluted local roads, trees and gardens in Kuantan, the local city through which the trucks rumbled at all hours. In order to protect the local environment, Malaysia banned bauxite mining since early January 2016. They extended the ban by three months in April and again extended the bauxite export ban till the end of 2016 in September. At the end of October, Malaysia’s Natural Resources and Environment Minister said the ban may be extended till 2018. But the original problem was caused by so many illegal mining operations, and the ban succeeded only in punishing the legal companies. Malaysia’s bauxite export to China shrank to 7.7mt in 2016, which was far below the bauxite volumes from Australia and Guinea.
It’s now looking like Indonesia will resume exports of bauxite to China. Indonesia is a mature bauxite supplier to China, and its reserves are far larger than the reserves in Malaysia. In any case, Australia, Guinea, Brazil and Ghana have all increased exports to China in the past two years. The likely re-emergence of Indonesia will eventually kill the bauxite industry in Malaysia.
The only advantage Malaysia offers to China is its low price – its ore is poorer quality than Indonesia or Australia. And if China goes ahead and shuts alumina refining capacity this winter for controlling the air pollution problem, alumina imports will take priority. That will cause even worse situation for bauxite businesses in Malaysia.
Malaysia bauxite will have a difficult time in 2017 and they are really at the edge of the abyss now.