Publications / Resources

28 Nov 11
Recent changes in the resource landscape

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The 2011 China Mining conference was held from 6 to 8 November 2011 in Beijing. Susan O’Rourke, Resources Partner and Head of China desk and Wayne Tan, Resources Graduate report on the key policy shifts and trends that emerged from the conference.

Ease in growth of steel demand in China

China’s crude steel annual output growth rate is forecast to decrease from 11.1% in 2011 to 3.1% in 2014.  Following growth rates that ranged from 15-28% from 2001 to 2009, this forecast will have a massive impact on the global industry as a whole.

Furthermore Beijing is looking to increase efficiency in the use of iron ore in steel production, which is expected to achieve up to 16 million tonnes of iron ore savings annually.  Other initiatives being implemented include an increase in the use of recycled steel which would further reduce demand for iron ore.

After a decade long period of massive industrialisation and urbanisation that has led the growth in steel and iron ore production, recent economic tightening in China’s policies has seen demand and prices for steel drop by 30%.

Chinese domestic iron ore output has grown by 24.5% since 2010, increasing to 946 million tonnes a year. However, as domestic ore only contains about half the iron content of imported ore, domestic ore remains more costly to produce and China still depends on imported iron ore for more than half of its iron needs.

With lower steel and iron ore prices, only domestic mines with quality ore that are profitable at all prices will be able to continue operating.   

Increased cooperation with domestic and international resource companies

Luo Tiejun, the deputy head of China’s Ministry of Industry and Information Technology’s Raw Materials department stated that despite the robust growth of China’s steel industry, the industry is still limited in resources and raw materials.

To address the perceived problem, Shougang Group, one of the largest steel companies in China has said it will focus on better utilisation of overseas and domestic resources as well as increase international cooperation in order to achieve a sustainable development path.

The company is already exploring more intensive partnerships with domestic and international coal and iron ore companies in order to develop new mines in China and abroad.  It is also planning to diversify and focus on developing related businesses as well as extending the production train to up-stream and down-stream industries.

Focus on domestic production

China is also seeking to ensure it has adequate mineral supplies by increasing its domestic mineral exploration through the application of advanced technology and innovation.  It aims to achieve a more balanced use of both domestic and overseas resources.

China’s Ministry of Land and Resources has established 47 new strategic exploration blocks domestically and it will also be announcing a new mining rights system to improve the distribution of China’s mining rights.

The Ministry hopes to establish a market oriented pattern that places more importance on technology and interdepartmental-coordination within its government which will ultimately improve the scale and intensiveness of domestic resource development. The intention is to also prevent the development of uncompetitive mines.

Move to innovative green mining practices to promote sustainability

Cu Shaoshi, the Land and Resources Minister has stated that the mining industry will need to follow a green, low-carbon, sustainable path.  The minister spoke of plans to incorporate green mining measures that would require newer mines to be developed in strict accordance with green mining standards.  Such measures are expected to be implemented at more than 600 demonstration sites during the next five years.

Luo Tiejun, the deputy head of China’s Ministry of Industry and Information Technology’s Raw Materials department stated that such green measures will help prevent the inefficient development of large mines.

Major hard coal producer Datong Coal Mine Group has embraced this movement towards environmental sustainability through a program of green exploration techniques as well as investment in scientific and technological abilities.

Datong has stated that its recycling model of coal production ensures that the by-products of coal mining are used wisely rather than discarded as waste. Its recycling measures include using:

  • residual coal pieces to produce methanol
  • coal rubble to make bricks
  • low-value coal, to generate electricity at their power plant
  • excess heat from the power plant to heat nearby homes
  • fly ash, in cement production, and
  • shale, as a raw material for kaolin (clay).

Datong has also implemented an extensive reforestation project around its mines and is opening up the Jinhuagong National Mine Park in 2012 to educate the people about the company’s mining culture.

Should you require any information on how these policy shifts may impact your business or if you have any other questions on any aspect of the article, please feel free to contact us.

South China Morning Post, ‘Global Iron Ore Prices to Stabilise’, Eric Ng, 8 November 2011
China Daily, ‘Extensive cooperation both at home and abroad is important to the mining business’, Du Juan, 8 November 2011
China Daily, ‘A more balanced way to ensure resource supplies’, Du Juan, 8 November 2011
China Daily, ‘Driving the economy and protecting the environment and ecology at the same time’, Shao Wei, 8 November 2011

Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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