Insurers Warn on Malaysian Bauxite Liquefaction

Kuantan Port

By MarEx 2015-02-11 04:08:19

Marine insurers have issued warnings about the risk of shipping bauxite in case excess moisture liquefies the cargo and makes it unstable after a ship carrying a Malaysian shipment of the ore sank last month.

The capsize and sinking of the Bulk Jupiter off Vietnam in January, with only one survivor, has raised concerns among some shipowners about a systematic risk in bauxite processing from the region's mines.

Industry sources said so far this had caused only minor disruptions to Malaysian shipments from Kuantan port and was unlikely to derail a ramp-up in exports.

"At this moment, there's no issue at all. The vessels are lining up at the ports (in Kuantan), awaiting to load bauxite," said Johnny Wong, a director at Kuantan-based bauxite miner Ideal Mineral Resources Sdn Bhd.

Since Indonesia, formerly China's top supplier, banned raw material exports a year ago, Malaysia has plugged part of the gap, with shipments last year up 2,000 percent to 3.3 million tons, a trend analysts expect to continue.

Marine insurers have issued advisories to shipowners warning of the risk of liquefaction - where a solid material turns to liquid - even though bauxite is not normally supposed to liquefy.

Marine insurer Skuld said it "has been alerted to the risk of possible liquefaction of cargoes of bauxite that may originate from Malaysia and Indonesia. Members are advised to urgently consider this issue if they are fixed or are planning to fix a vessel for such a voyage," in an advisory to members.

Heavy rains and flooding in Kuantan, on the east coast of Peninsular Malaysia, had been partly blamed for wet cargo.

So far the impact appears to be limited at the port, which is estimated to have the capacity to ship out about 1 million tons of bauxite a month.

At least one bauxite cargo had to be unloaded at Kuantan port due to safety concerns it was liquefying, according to industry sources.

And the port is preparing new regulations on cargo testing, which could make tests more difficult and extend the time they take from a week currently, shipping experts said.

China's aluminum smelting industry is monitoring the issue, but Wan Ling of consultancy CRU said Malaysian bauxite exports to China were still expected to be 10 million tons this year.

"We spoke to the bauxite procurement people in China. They said the impact was very limited and they will continue to import bauxite, from Malaysia and other countries," said Ling.

Copyright Reuters 2015.