China fuels red boom in global bauxite trade

Malaysia is a small player in the global bauxite industry but strong demand from China has fuelled a red boom in the country.

Bauxite is processed into aluminium oxide or alumina before being smelted to extract aluminium, which is used in all kinds of products ranging from packaging to aeroplanes.

In 2013, Malaysia reportedly produced 208,770 tonnes of bauxite, a tiny figure compared to world leader Australia which produced 81 million tonnes.

The following year saw a three-fold jump in Malaysia’s production to 962,799 tonnes, according to figures from the Minerals and Geoscience Department.

Last year, Malaysia produced an estimated 20 million tonnes to overtake Australia as the biggest bauxite exporter to China.

The staggering jump in production is partly to fill a void left by Indonesia which restricted exports in 2014 to compel local companies to develop smelters, add value and create more jobs.

Strong demand from China over the past few years has made bauxite mining a lucrative business in Malaysia.

Mining operations have, however, left many areas covered in red dust and created worries about river and sea water contamination.

Despite the big profits, questions have been raised on how long the current bauxite boom can last.

Reuters reported that the price of aluminium fell last November to its lowest in six years as China’s economic growth slowed, creating an oversupply.

It has also been noted that Malaysia has a relatively small reserve of bauxite.

Bloomberg quoted mining company Rio Tinto Group’s chief executive officer for aluminium Alf Barrios as saying that “Malaysia can only maintain its current level of production for another three or four years before its reserves run out”.

The Minerals and Geoscience Department in its 2014 Compendium states that Malaysia’s aluminium/bauxite reserves currently stand at 18 million metric tonnes valued at RM1bil.