Bauxite prices boosted by temporary ban on mining in Malaysia – by (Strait Times/Bloomberg – January 26, 2016)

KUALA LUMPUR (BLOOMBERG) – Bauxite mining in Malaysia went on a tear after neighbouring Indonesia banned exports, transforming an industry that hardly existed until 2013 into China’s biggest supplier.

In September alone, China bought a record 3.7 million metric tonnes of Malaysian aluminum-rich bauxite. It was a US$170.8 million (S$244.3 million) windfall for the oil palm-covered hills in eastern Pahang state, where dozens of companies have rushed in, paying smallholder-farmers for their land to be dug up.

Now, chunks of farmland resemble moonscapes of bauxite quarries and dusty rock piles, which some residents, including Pahang royalty, say have polluted the environment. In response, the government halted mining on Jan 15, starting a three-month moratorium to gain control over an industry that has exposed gaps in Malaysia’s mining laws.

“If everything followed standard procedure, this would not be happening,” said Mr Teh Teck Tee, managing director of Aras Kuasa, who began mining bauxite near the city of Kuantan in mid-2014 and exports solely to China. He is hoping the moratorium will enable the authorities to root out operators without proper permits and allow exports to resume with better control and compliance, he said. “This will wipe out the illegal. It’s good.”

Pahang, the largest state on Peninsular Malaysia, accounts for more than 70 per cent of the country’s estimated 109.1 million tonnes of bauxite reserves. Mining of the ore, used to make aluminum, surged last year after Indonesia prohibited the raw material from being sold overseas. China, instead, bought almost 21 million tonnes from Malaysia, valued at US$955.3 million, in the first 11 months of last year.

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