Abstract
The Malaysian Chamber of Mines believes that the mining industry is already on
the road to recovery and
is urging investment in the sector. Although it
is somewhat predictable that the organisation will talk up
the sector,
there is also some truth in their optimistic outlook. The Chinese economy is
beginning to
recover, aided by the impact of a huge fiscal stimulus
package. This in turn will increase demand for
minerals and metals. In
Malaysia, investors are now beginning to buy back mining stocks, which is
an
encouraging sign. As most mining projects have a lead time of three to
five years before returns can be
expected, investors are clearly of the
opinion that the market has bottomed out. Investors will be hoping
to reap
positive returns on investment as the global economy begins to recover,
returning growth to the
Malaysian mining sector.
Malaysia’s key
competency lies in natural gas and oil, without which the minerals industry
amounts to a
very small figure. Bauxite, coal, feldspar, gold, iron ore,
kaolin, mica, monazite, struverite, tin and zircon
are the main minerals
currently produced by Malaysian mines. The nation imports most of its metallic
and
non-metallic mineral requirements.
Imports of tin concentrate, for
example, continue to outpace local production, suggesting that there is
significant room for growth in Malaysia’s refining capacity. Malaysia
Smelting Corp (MSC) is one of
the world’s largest producers of
refined tin, although it imports a substantial portion of its raw material
needs. Malaysia was one of the world’s largest tin producers in the
1980s, but the exhaustion of reserves
has resulted in plummeting
production levels. In 1989 Malaysia produced 32,034 tonnes of tin, but
this
had fallen to 2,263 tonnes by 2007. There are currently 13 active tin
mines in Malaysia, compared with
thousands in the 1970s.
In May 2009,
MSC announced that it had recorded a pre-tax loss of MYR9.2mn (US$2.64mn) for
Q109,
compared with a pre-tax profit of MYR25.6mn (US$7.35mn) in Q108.
Revenues were hammered, falling
to MYR351.7mn (US$100.9mn) in the quarter,
compared with MYR572.6mn (US$164.3mn) in Q108.
MSC is the third-largest
producer of refined tin in the world and exports around 90% of its output,
with
its major markets being India, China, South Korea and Japan. In 2008
the price of tin peaked at around
US$25,000 per tonne, but has now fallen
to around US$12,000-14,000 per tonne. Demand for tin has also
crashed, as
the global economy ground to a halt. In Q109, consumption of refined tin was
around 1,700
tonnes, less than half the level seen in Q108.
Industry
Forecast
Meanwhile, the mining sector should begin to recover in 2010
after being battered by the global economic
headwinds in late 2008 and
early 2009. With China consuming around 20-25% of Malaysia’s base
metals
and minerals production, the performance of the Chinese economy
will be vital to the fortunes of the
Malaysian miners. A huge fiscal
stimulus package in China should stimulate demand in core sectors such
as
construction, increasing demand for mined materials. Localised stimulus
packages should also boost
the Malaysian construction sector, increasing
demand for steel and iron ore. BMI’s mining forecast
suggests an
industry value of MYR0.6bn (US$0.2bn) for 2013, representing a compound annual
growth
rate of 8% over the forecast period.
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