Malaysian anti-graft agency finds corruption in bauxite mining

[KUALA LUMPUR] Malaysia may expand its crackdown on bauxite mining after the nation's anti-graft agency said it found "elements of corruption" committed in the extraction of the ore.

The government imposed a three-month ban on bauxite mining in its largest producing state on Wednesday. The Malaysian Anti- Corruption Commission "has received many complaints on environmental pollution from uncontrolled bauxite mining activities in Pahang state," the agency said in a statement following the ruling, adding that it won't hesitate 'to take action against those found involved in corruption or misuse of power."

Malaysia, the biggest shipper of bauxite to China, will stop mining the ore from Jan 15 to cut river and sea pollution, according to Natural Resources and Environment Minister Wan Junaidi Jaafar. Exports will be allowed during the moratorium to reduce port inventories, and after the suspension the government will limit bauxite production to the nation's capacity to ship the material, he said.

The commission didn't give details on the nature of the corruption it found or the complaints it received.

Malaysia supplied more than 40 per cent of China's imports of the aluminum-making raw material last year after Indonesia imposed a ban on shipments in January 2014.

China produces about half the world's aluminum used in everything from aircraft to door frames and drink cans. The country's exports of the metal and its products surged 36 per cent in November from the previous month, helping push global prices down 19 per cent in 2015.

The ban would have to last longer than six months before it starts to hurt China, said Paul Adkins, managing director of consultancy AZ China Ltd. "I doubt there will be much of a price spike reaction. The market is acutely aware that Chinese smelters appear to be slowing down, and with so much material in stockpile, there will be no interest by Chinese buyers to pay more."

Red dust from trucks carrying ore to Kuantan port had blanketed roads, trees and plants, threatening air purity and water resources, said Fuziah Salleh, member of parliament for Kuantan, capital of Pahang. The government should suspend exports until proper laws are in place to ensure mining is sustainable and to curb illegal operations, she said Tuesday.

"Things are just out of control at the moment," Mr Fuziah said. "I'm very concerned that the damage may be irreversible."

All the inventories at Kuantan port have to be exported or moved to a central area equipped with proper drainage, washing bays and filtration, according to minister Wan Junaidi. The government will extend the moratorium if the industry fails to take the necessary steps within three months, he said, while the central stockpile will only be accessible to legal miners to prevent illicit operations.

Malaysia supplied 21 million metric tons of China's imports of 49 million tons in the first 11 months of 2015, according to Chinese customs. The government will allowing shipments under existing permits and has stopped issuing new export licenses.

The north-eastern state of Terengganu already froze new bauxite mining applications in September, citing environmental concerns.

BLOOMBERG