Report casts doubt on 2016 bauxite supplies

Most news concerning global metal demand and pricing has been gloomy in 2015 and so far in 2016, but a report from a London-based research firm is pointing to a supply factor that could put upward pressure on aluminum pricing.

In its new “Metallurgical Bauxite & Alumina” report with forecasts to 2026, London-based Roskill notes that China, the world's largest alumina and aluminum producer, lost Indonesia in 2014 as a significant supplier of bauxite to feed its alumina refineries and now there may be a supply disruption from Malaysia.

Following Indonesia’s decision to implement a ban on the export of unprocessed ores [in 2014], China’s aluminum industry “turned to Malaysia in an attempt to fill the void,” writes Roskill. “Malaysia’s ability to rapidly increase its output was demonstrated by its production soaring almost 600 percent from 2014 to 2015 [and] Malaysia [accounted] for 45 percent of all bauxite delivered to China in 2015,” adds the research firm.

However, say the Roskill report authors, “The viability of Malaysian bauxite as a long-term replacement for Indonesian material remains in question. In January 2016, Malaysian officials announced that a three-month moratorium on bauxite mining in the country would be implemented with effect from 15 January 2016. The ban follows increasing environmental fears surrounding pollution of rivers and the sea in the country’s leading bauxite-producing state of Pahang. As part of the ban, the government will certify that mining companies are complying with new operational measures. Those mines that are not operating according to the new guidelines risk not having their Approved Permits (AP) for mining renewed. Exports were granted during the moratorium period to clear stocks and relieve ports of material.”

The Roskill report refers to Vietnam and Guinea as nations that could increase their bauxite exports to make up for any Malaysian shortfall. However, Vietnam has already expressed environmental concerns and production in Guinea “remains shackled by a lack of rail infrastructure and port facilities,” say the report’s authors.

Any effects on supply and pricing may be short-lived, says Roskill, noting that Chinese companies may have the ability to mine for additional bauxite within China’s borders and that a temporary shortage is not likely to have a lasting impact since, globally, “the alumina and aluminum industries have been in a state of oversupply for the past few years.”