By Emily Chow
| KUALA LUMPUR
KUALA LUMPUR Already under fire for widespread environmental damage, Malaysia's once lucrative bauxite mining industry is facing a likely death knell from neighbouring Indonesia's move to allow a resumption of exports.This time last year, Malaysia was the world's biggest supplier of the aluminium-making raw material to top buyer China, but its exports tumbled after government action aimed at reining in the little regulated industry.The latest move could spell the end for a sector that only sprang to life in late 2014 after Indonesia banned ore exports, and illustrates the risks facing miners across Southeast Asia from increasingly uncertain government policy.Copper giant Freeport-McMoRan Inc (FCX.N) warned last week it could slash output from Indonesia amid a long-running dispute with the government, while the Philippines has ordered the closure of more than half the country's mines on environmental grounds."Policy risk is huge in mining right now," said Daniel Morgan, mining analyst at UBS in Sydney. "In supplier policy, you've got changes to Indonesia's mining policy, the Philippines and Malaysia."A host of mining operations sprang up along Malaysia's bauxite-rich east coast to fill a supply gap after Indonesia in 2014 barred exports of mineral ores in a bid to push miners to build smelters.In 2015, Malaysia shipped more than 20 million tonnes to China, well ahead of nearest rival Australia and up nearly 700 percent on the previous year. In 2013, it shipped just 162,000 tonnes.But the dramatic rise came at a cost as largely unregulated miners failed to secure stockpiles of bauxite. The run-off from monsoon rains turned rivers and coastal seas red, contaminating water sources and leading to a public outcry.
The government imposed a mining moratorium in early 2016, and shipments to China from existing stockpiles fell to 165,587 tonnes in December, with little indication the government is set to change its mind.MINING BAN
Malaysia's natural resources and environment ministry said any decision to lift the moratorium would be based on how well miners follow regulations to preserve the environment rather than economic gain.Recent rains in Kuantan have caused some bauxite runoffs from existing stockpiles, minister Wan Junaidi Tuanku Jaafar told Reuters.
"The heavy rains proved that the mitigation was not adequate. Now by having this before me, I am not yet prepared to allow them to start the operations," he said, declining further comment on the topic.Indonesia introduced new rules last month that will allow exports of nickel ore and bauxite and concentrates of other minerals in a sweeping policy shift, but did not specify when it would resume exports.The announcement could be the final nail in the coffin for Malaysia's industry, as its miners expect China to switch to Indonesia's better quality and cheaper ore, due to lower production costs. "Indonesian bauxite miners kept a lot of stockpiles ... They can sell cheap," said a miner from local company based in Kuantan, a key bauxite mining area in the state of Pahang.
"If the volume coming out of Indonesia is over 10 million tonnes, Malaysia has to say goodbye."Unlike recent ructions in nickel supply from Indonesia and the Philippines that pushed up prices, Malaysia's near exit from bauxite has had little impact on the supply chain as new suppliers emerged, particularly in Guinea in West Africa."Some of these commodities are pretty plentiful, like bauxite for instance," noted UBS's Morgan. "When we talk to aluminium companies in China, we haven't detected that they're worried about a bauxite shortage."The greater effect may be on Malaysia's export-based economy where bauxite surged to become a key mineral shipped to China, its largest trading partner. At a bauxite price of $50 a tonne, Malaysia's 2015 exports were worth over $1 billion.The scandal-tainted Prime Minister Najib Razak's government is pushing to boost revenue as he prepares for a tough election that has to be called by end-2018."There will be less export income," said Ooi Kee Beng, deputy director of Singapore based research centre ISEAS-Yusof Ishak Institute. "The loss of jobs at a time when common people are facing economic difficulties will have political impact that is unwelcomed by the government." (Additional reporting by Joseph Sipalan and Melanie Burton in Melbourne; Editing by Praveen Menon and Richard Pullin)
This story has not been edited by Firstpost staff and is generated by auto-feed.
Published Date: Feb 14, 2017 05:45 AM | Updated Date: Feb 14, 2017 05:45 AM