Bintan bauxite mines may be closed for good, sources say

Bintan bauxite mines may be closed for good, sources say

Metal Bulletin, Singapore

29th August 2007

Bauxite mining in Indonesia’s west Bintan region is unlikely to resume quickly following shutdowns earlier this month, with some market participants suggesting that affected mines may be permanently closed.

“We heard that it could be a permanent shutdown due to pollution caused by all the mining,” an official from Shandong Chiping Xinfa Huayu Alumina Co told MB.

Officials in Bintan also said they do not expect a quick resolution to the issue.

“There may only be a decision after November, as that's when the local government will begin negotiations with miners,” said an official from a Bintan-based miner.

“Because the land is for a water project, you can’t have mining going on in the area,” he added.

Bintan, an island just south of Singapore, is an important bauxite production base for Indonesia, which is the largest supplier of bauxite to Chinese alumina refineries.

The Indonesian central government has ordered miners in the west of the island to stop operations as it wants land set aside for a water project. The order came despite the local government having already issued licences allowing eight bauxite miners to work the land, according to a source in Bintan (MB Aug 16).

Chinese alumina refineries have been playing down the impact of the stoppage and have maintained that their alumina production has not suffered as most supplies do not come from the affected area.

The affected mines produce around 300,000 tpm of bauxite, not the 800,000 tpm claimed by miners in Bintan, the Chiping official estimated.

“Some of the mining leases were going to expire in July anyway,” he added.

The stoppage in Bintan has not provided support for Chinese domestic alumina prices, which are continuing to slide on rising domestic supply, market participants reported.

Domestic alumina prices are reported at 3,450-3,550 yuan ($457-470) per tonne duty paid, down 50 yuan from 3,500-3,600 yuan per tonne a week ago.

A few unconfirmed deals are said to taking place in the 3,400-3,450 yuan per tonne range. This is unlikely to be representative of the market, though prices are likely to slip further in the near future, market participants said.

“I think by next week 3,400-3,450 yuan per tonne will be the main transacted price,” predicted Shan Guibin, a manager with Chinese information provider Chinaccm.

Some analysts have warned that it may be too early to gauge how big an impact the Bintan stoppage will have on Chinese alumina production, despite the optimistic statements from refineries.

“People are saying that there is no big effect now. Then again, the refineries typically announce the good news and not the bad,” a Shanghai-based aluminium analyst noted.