Asian Metal: Hello, Mr. Du, thank you for taking the time to give this interview. Data shows that China imported about 6.1 million tonnes of bauxite from Malaysia in the first five months of 2015. Do you think this trend will continue in H2 of this year? And why?

Du: I don’t think so. The bauxite output in Malaysia in H2 may see a decline of around 40% compared with that in H1. In accordance with the latest regulations in Malaysia, mines which haven’t obtained mining permits before 31 August will be shut down. The output of bauxite is expected to see a reduction of at least 40% if harsh measures are taken to ensure the enforcement of this policy.

Asian Metal: What were the total bauxite exports of your company in H1 of this year? What changes do you expect to see in the export volume in H2?

Du: We exported 1.2 million tonnes of bauxite in H1. The export volume in H2 is expected to remain stable as we have a mining permit.

Asian Metal: How many kinds of mining permits are there in Malaysia?

Du: Three. They are private land mining permits, government-owned land mining permitgovernment-owned land mining permitgovernment-owned land mining permitand MOL. MOL means that you can purchase ores from others to wash or sell, but this permit will be confiscated after August.

Asian Metal: Do you know how many companies have obtained mining permits?

Du: As far as I know, there are 20 permits, but I don't know how many companies have got them.

Asian Metal: As the owner of the largest bauxite mine in Malaysia, what advantages does your company have over the others?

Du: Firstly, shipments are relatively fast as wehahahahaof our own since H1 with no need to wait for berths; secondly, our mine is rather closer to the wharf with a distance of about 15km; thirdly, we bought this mine a long time ago and the quality of the raw material is very good and stable with more than 40% aluminum content and less than 5% silicon content.

Asian Metal: Does your company have any new mines?

Du: Yes. We have four which are being mined at the moment. We started exploiting three mines in H1 and one in H2. So there will be no difficulty in reserving 5 million tonnes of bauxite in the second half of this year.

Asian Metal: Many companies are now increasing their washing equipment. Does your company have plans to increase this equipment?

Du: Yes. In fact we have already bought washing equipment which hasn’t been put into operation. We have had to put off operating it until we see whether or not we can get the ore washing permit.

Asian Metal: What’s the quality of bauxite after washing in Malaysia?

Du: The aluminum content can reach about 46-50% and the silicon content is less than 5%. Actually, in Malaysia the ore recovery rate is only 1:3, namely 1t of bauxite can be recovered from 3t of ores after washing. The ore washing cost is very high.

Asian Metal: What do you think about the bauxite in Johor?

Du: Johor has a long history of bauxite mining, but the mining volume isn’t high with 1-2 shipments per month.

Asian Metal: In your opinion, what are the advantages of Malaysian bauxite compared with that in Australia, Indonesia, India and other regions?

Du: One advantage is the price, which is considered to be too low. A reasonable FOB price for Malaysian bauxite should be USD33-35/t, when compared with that of Indonesian bauxite. In addition, the freight cost is relatively cheap. For example, the freight cost from Malaysia to China is only USD7-8/t.

Asian Metal: Are you concerned about the rumor that Indonesia may remove its bauxite export ban in September?

Du: We have no need to worry, as Malaysian bauxite is very competitive. Besides, the primary ore mining is unsustainable in Malaysia and the output will reduce by at least 50% in a year to 18 months.

Asian Metal: According to the statistics from Asian Metal, China consumed about 2.5 million tonnes of imported bauxite in total in H1 of 2015 with an inventory of around 2.9 million tonnes at the end of June. The stocks will last roughly seven months if calculations are based on the monthly consumption at present. Do you think the bauxite price will move up in Q3 and Q4 if the bauxite supply in Malaysia slides in accordance with your calculations?

Du: It’s unlikely a uniform price will be seen as there are many illegal miners in Malaysia. We won’t know whether there is a uniform price until after August. In addition, Malaysia will raise its export tax by 100% from USD4/t to USD8/t after August.

Asian Metal: If so, the cost will be increased again.

Du: That’s right, the cost will go up. The cost has seen an increase of 15% since January due to rising dock charges, freight expenses and so on. The cost will rise by 20% if the export tax is increased.

Asian Metal: How much does it cost to deliver the goods to the wharf at the moment?

Du: About USD21-22/t. The profit margin is slim right now, if dock charges and other expenses are included.

Asian Metal: We understand the mainstream FOB price of bauxite stands at USD29-30/t currently and some suppliers have raised their offers to USD32/t with no transactions concluded.

Du: Yes, I haven’t heard of any deals being sealed either. Some companies produce bauxite based on long-term orders with no change in price.

Asian Metal: Is there any possibility that the price will go up before the rainy season due to the cost increase?

Du: It depends on the extent of policy implementation.

Asian Metal: Recently, I have heard that the stocks in Kuantan port, Malaysia are starting to accumulate. How much do you know about this?

Du: The bauxite output has started to rise again as supervision by the Malaysian government becomes lax with the lunar New Year coming up. Inventories that were once reserved in plants are being delivered to the ports, resulting in an increase in port stocks. In my opinion, this trend will not last for very long.

Asian Metal: When will the lunar New Year start?

Du: According to the announcement by the Ministry of Transport, we’ll have a holiday from 14 to 22 July.

Asian Metal: As to the ports, people have also tried using the Kemaman port. Do you think this port will run smoothly in H2?

Du: I don’t think the Kemaman port is satisfactory as the transport route is 50 kilometers longer, which is a disadvantage in view of the insufficient transport capacity. Besides, there are two more companies which have barges in Kuantan port. As a result, the total number of such companies is up to four and our company is one of them.

Asian Metal: What are the shipment advantages of your company?

Du: Our advantage is that goods can be shipped directly once they arrive at the port as we have barges of our own. In addition, we began using vessels to load goods in February of this year with a total shipment volume of eight vessels in H1.

Asian Metal: In your view, how can the bauxite market in Malaysia develop healthily?

Du: Only those with mining permits can enter the market. In which case, the primary ore mining will last around two years.

Asian Metal: As you have mentioned above, it is unlikely a uniform bauxite price will be seen in Malaysia. It will be very difficult to reach a uniform price among so many suppliers, won’t it?

Du: Yes. There are many illegal miners and middlemen. All of us want to sell at a higher price, but we have to consider the downstream markets, such as the electrolytic aluminum and alumina markets. It is difficult to make deals if downstream plants can’t make profits. Therefore, a win-win situation can be created only if all markets see an improvement.

Asian Metal: Our website provides quotations for various grades of Malaysian bauxite. You’re welcome to take these offers as a reference.

Du: That’s great!

Asian Metal: Thank you again for participating in this interview. We hope to keep in touch with you and exchange opinions on market information in the future.