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Potential Malaysia bauxite ban to chip away at China stockpiles -industry

Published 04/01/2016, 06:16 pm
Updated 04/01/2016, 06:20 pm
© Reuters.  Potential Malaysia bauxite ban to chip away at China stockpiles -industry
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* Malaysia may suspend bauxite mining due to green concerns

* Bauxite used to make aluminium

* Would interrupt exports to top aluminium producer China

* Seen denting China bauxite stockpiles, not aluminium production

By Joseph Sipalan and Melanie Burton

KUALA LUMPUR/MELBOURNE, Jan 4 (Reuters) - A potential suspension on bauxite mining in Malaysia, the world's top exporter of the aluminium-making ingredient, could dent stockpiles in China but is unlikely to curb breakneck output in the aluminium sector there, industry and analysts said on Monday.

The Southeast Asian nation is pushing to suspend bauxite output due to concerns over its impact on the environment, threatening to interrupt supply to No.1 aluminium producer China, a cabinet source said at the weekend.

The councillor in charge of the environment for Malaysia's main producing state of Pahang, Mohd Soffi Abd Razak, told Reuters on Monday that Pahang's chief minister and the national resources minister would make a joint statement on the issue "very soon".

World prices for aluminium, used in everything from planes and trains to packaging, sank to their lowest in more than six years last November as China grapples with oversupply fuelled by its slowing economy.

That forced China's loss-making industry to band together to pledge production cuts, with markets looking out for any other signs output could ease.

"(A suspension in Malaysian bauxite mining) will impact stockpiles, but it won't impact China's metal production," said Paul Adkins, managing director of consultancy AZ China. He added that a three-month ban could shave about 6 million tonnes off China's current bauxite stockpiles of around 25-30 million tonnes.

Malaysia accounted for over 40 percent of China's 49 million tonnes of bauxite imports across January to November last year.

The country's largely unregulated bauxite mining industry has grown rapidly since Indonesia banned exports of the material in early 2014, forcing China to seek supplies elsewhere.

But that frenetic growth has sparked uproar over its environmental impact, with bauxite mining blamed for turning the waters red on a stretch of coast and surrounding rivers in eastern peninsula Malaysia last week.

The cabinet wants to temporarily halt bauxite mining until regulations, licensing and environmental protection can be put in place, the source told Reuters on Saturday.

Meanwhile, any suspension in mining could see more demand for material from rivals suppliers such as Australia or India. Australia's Rio Tinto RIO.AX RIO.L announced a $1.9 billion mine expansion in northern Australia late last year.

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