Bullish on Malaysia's bauxite market

Asian Metal: Hello, Mr. Zhang. Welcome to our interview column. Could you first introduce your company's business?

Mr. Zhang: Liannex Corporation is a diversified multinational enterprise integrating resource extraction, advanced processing, logistics and transportation, ocean shipping, capital operations and global trade across the entire supply chain. We have established a strong presence in Kuantan, Malaysia, where we hold multiple joint-venture bauxite mining rights and operate officially certified washing facilities, providing a solid foundation for resource processing.

In terms of logistics, our shipping subsidiary, LFG (Lianson Fleet Group), draws on more than a decade of chartering experience to navigate market conditions characterized by fluctuating oil prices, ensuring reliable transportation for the group's cargoes. From the mine to the vessel's hold, we maintain strict control over every stage to ensure efficient loading, reliable shipping schedules and fair pricing, delivering on our commitments to customers.

LFG currently operates four Supramax bulk carriers. These vessels serve routes from the South China Sea to the Indian Ocean, primarily transporting Malaysian bauxite and Indonesian coal to major ports across Asia.

For logistical support at Kuantan Port, Liannex has established a long-term strategic partnership with Liraship Agency Sdn Bhd, a shipping agency with a 46-year history. Under the agreement, Liraship coordinates key operations, including truck transportation, cargo consolidation at the port, cargo preparation and customs clearance. Liraship is a designated freight forwarder for the government agency PMC and is responsible for coordinating all freight forwarding operations related to mineral exports by the Pahang state government. Its extensive government connections and port-handling expertise provide reliable and efficient customs clearance for Liannex's bauxite exports. This partnership has become a cornerstone of Liannex's operations in Kuantan and an important pillar of the group's supply chain resilience.

Our bauxite products are of good quality, with an Al2O3 content of 47%min and a SiO2 content of 5%max, meeting the stringent requirements of premium international customers. Since our maiden voyage in 2020, we have successfully exported 23 Supramax vessel cargoes of bauxite, all destined for China, providing a stable, long-term supply of raw materials to China's aluminum industry.

Asian Metal: When did your company start producing bauxite in Malaysia? What are your production capacity, reserves and product specifications? Which countries are your main export destinations?

Mr. Zhang: Liannex actually began trading Malaysian bauxite as early as 2015, during the peak of the country's bauxite export boom. At that time, our focus was primarily on trade and investment, and we were not deeply involved in mining or processing.

Subsequently, rampant illegal bauxite mining in Malaysia, coupled with inadequate government oversight, caused severe environmental pollution in Kuantan. The government therefore imposed mining and export bans on the bauxite industry in Kuantan, Pahang, between 2016 and 2019. Strict monitoring measures and environmental impact assessments were subsequently introduced, and mining gradually resumed from 2020.

Liannex obtained its bauxite washing license at the end of 2021 and officially commenced production in early 2022, reflecting the industry's gradual transition toward more regulated operations following the lifting of the ban.

We currently operate two bauxite washing units, with an annual production capacity of up to 1.2 million tonnes. Our bauxite is of good quality, with an Al2O3 content of 47%min and a SiO2 content of 5%max, meeting the stringent requirements of premium international customers. Our estimated reserves stand at approximately 4 million tonnes. To date, we have exported 23 Supramax vessel cargoes of washed bauxite.

Asian Metal: What restrictions does the Malaysian government currently impose on bauxite mining and exports? What are the costs of bauxite production and exports in Malaysia?

Mr. Zhang: Bauxite must have an Al2O3 content of at least 40% to qualify for export, and exporters must apply for export permits. Permit allocations are approved based on exporters' existing bauxite inventories.

In 2015, Kuantan was in its golden age of bauxite mining, characterized by low costs, relaxed regulations and ample diesel subsidies, with fully loaded trucks traveling between mining areas and ports. However, the ban imposed in 2016 brought this extensive, low-cost operating model to an end.

Following the lifting of the ban, environmental compliance requirements, mining permit requirements and transportation oversight all became increasingly stringent. The year 2025 marked another major turning point. New truck-loading regulations introduced by the Ministry of Transport, the official cancellation of diesel subsidies and the sustained appreciation of the US dollar against the Malaysian ringgit combined to drive up costs. As a result, the overall cost of mining and exporting Malaysian bauxite has risen far above its historical average.

Before 2016, export costs were below USD20/t. They have now climbed to approximately USD30/t.

Asian Metal: Indonesia began importing Malaysian bauxite in the third quarter of this year. What are the main reasons for this development? How do you view the outlook for Indonesian demand?

Mr. Zhang: Liannex was the first company to supply Malaysian bauxite from Kuantan Port to Bintan Island in Indonesia. On July 14 this year, our vessel, MV Lianson Odyssey, successfully loaded 40,000 tonnes of bauxite at Kuantan Port.

New alumina refineries in Indonesia are about to commence operations and currently require substantial bauxite stockpiles to support subsequent production. Although Indonesia has abundant bauxite resources, the government enforces strict resource controls, and deposits are scattered across different islands. As a result, transporting domestic ore between regions involves complicated procedures and high costs.

By contrast, Kuantan in Malaysia has the necessary bauxite export permits, a stable supply of material and well-established shipping routes, enabling suppliers to respond quickly to Indonesia's restocking demand. Amid high freight rates, the shipping route from Kuantan to Indonesia is actually more cost-effective. We expect exports along this route to surge in the short term.

Indonesia's external bauxite demand currently stands at up to 4 million tonnes per year. I believe Malaysia could supply 150,000-200,000 tonnes per month. Given the issues surrounding bauxite quotas in Indonesia, I expect the country's external demand for bauxite to continue increasing.

Freight rates from Malaysia to Indonesia currently stand at around USD8/t, compared with approximately USD11/t for shipments to China.

Asian Metal: Malaysian bauxite prices have risen since August, driven by higher ocean freight rates for Guinean bauxite. What is the current price situation for Malaysian bauxite, and what is your outlook for the fourth quarter?

Mr. Zhang: The rise in Guinean bauxite prices is primarily attributable to higher ocean freight rates amid rising international oil prices, rather than a surge in demand from China.

Although Malaysia is geographically closer to China and offers lower freight costs, China's alumina prices are currently weak, while inventories of high-grade Guinean bauxite have reached historic highs. These two factors have further undermined the price competitiveness of Malaysian bauxite in the Chinese market. As a result, Malaysian material is becoming increasingly disadvantaged in terms of cost-effectiveness.

Malaysian bauxite with an Al2O3 content of 40%min is currently priced at USD33-34/dmt FOB. We expect prices to remain stable in the fourth quarter.

Asian Metal: What are the advantages and disadvantages of Malaysian bauxite compared with Guinean bauxite?

Mr. Zhang: In terms of quality, Malaysian run-of-mine bauxite has inherent disadvantages compared with high-quality Guinean ore. To compensate for this shortcoming, we must invest in additional processing stages. Strict management is required at every stage, from controlling the quality of ore at the mining source and sorting and screening the material to washing out impurities and blending the final product. Naturally, these additional processes drive up costs.

By comparison, Guinean bauxite benefits from higher inherent quality, allowing for a shorter processing chain and lower costs. Malaysia's only natural advantage is its geographical proximity to the Chinese market, which translates into significantly lower ocean freight costs than for Guinean material, by approximately USD20/t or more.

Asian Metal: Malaysian bauxite exports reached 20 million tonnes in 2015 and exceeded 5 million tonnes in both 2016 and 2017, but have remained below 1 million tonnes annually in subsequent years. What are the reasons behind this decline?

Mr. Zhang: From 2015 to 2017, Malaysia's bauxite industry experienced a boom. Regulations were relatively relaxed and costs were low, while Indonesia's ban on bauxite exports prompted substantial capital inflows into Kuantan, creating an unprecedented market boom.

However, the ban introduced in 2018 brought the industry to a sharp downturn. Although the ban was lifted in 2020, environmental and compliance requirements became substantially more stringent, and mining costs rose significantly compared with previous levels.

Meanwhile, China's alumina prices remained persistently weak, putting downward pressure on bauxite prices. Rising costs and falling selling prices squeezed margins from both ends, leaving Malaysian bauxite exports in a prolonged slump.

In addition, Kuantan Port currently has bauxite loading capacity of approximately 200,000 tonnes per month, as other loading equipment has been allocated to different products.

Asian Metal: Do you expect Malaysia's annual bauxite exports to exceed 1 million tonnes in the next few years?

Mr. Zhang: I believe this target is achievable, as demand for bauxite now comes not only from China but also from Indonesia.

After years of developing our business in Malaysia, Liannex has established a mature trading network covering the entire supply chain in Kuantan, supported by a deeply integrated resource system. On this solid foundation, we are confident in our ability to turn our resource advantages into product advantages while maintaining excellent quality and competitive pricing.

Our goal is clear and firm: to exceed 1 million tonnes in annual exports. This is more than just a numerical target; it reflects Liannex's commitment and capabilities as an industry leader.

Asian Metal: What is the current state of development of Malaysia's aluminum industry chain? Is the government also encouraging the development of alumina refining and primary aluminum smelting?

Mr. Zhang: Malaysia's current conditions are not conducive to the development of a fully integrated aluminum industry chain. There is a primary aluminum smelter in Sarawak, East Malaysia, but it also relies on imported alumina for production. At present, the Malaysian government has no clear plans or targets for the development of the aluminum industry.

Asian Metal: Finally, we wish your company further breakthroughs in bauxite development and greater diversification of its export channels!

Mr. Zhang: Thank you. Let's work together toward shared prosperity!