Fears that Malaysia’s return to exporting bauxite could hurt the already fragile large bulker market have been played down by a top regional analyst.
The country recently announced that its mining ban will not be extended after it expires on 31 March 2019, according to its environment minister.
Bauxite mining has been banned in Malaysia since early 2016 after significant pollution occurred due to unregulated mining.
“Malaysia was once the largest bauxite supplier to China, with shipments peaking at nearly 3.5mt a month at the end of 2015,” says Ralph Leszczynski, Banchero Costa’s head of research in Singapore.
He says Malaysia initially became a large bauxite exporter right after the ban on exports from neighbouring Indonesia, which left a large void in the market.
“There was big appetite from Chinese importers looking to substitute Indonesian bauxite at any price,” he told TradeWinds.
“Now the global situation is quite different. In recent years China has invested a lot in mines and infrastructure in Guinea, with bauxite volumes between the two countries skyrocketing from 12mt in 2016 to 38mt last year.”
On top of which, said Leszczynski, exports from Indonesia have also resumed. Last year China imported 7.5mt of bauxite from Indonesia, up from 1.3mt the year before.
Exports from Australia have also steadily increased in recent years. In 2018 Australia exported about 30mt of bauxite to China, up from 25.5mt in 2017 and 21.3mt in 2016.
Leszczynski adds that volumes from both Guinea and Australia can easily increase this year, with new mining developments coming on the market in both countries.
Indeed, Rio Tinto’s Amrun bauxite mine in Australia is targeting a 10mt per year increase in exports, he told TradeWinds.
Last year China increased its bauxite imports by 20.3% year-on-year to 82.7mt, according to Banchero Costa’s figures.
But Leszczynski said that China’s demand for bauxite could slow down, considering that its economy is slowing down, and that alumina and aluminium prices have declined in recent months.
“Therefore, I do not really see much space for Malaysia to enter the bauxite market at this point in any significant way, and they have probably missed the boat,” he said.
