中国矿业和金属-苏醒的巨人

China Mining and Metals: The Waking Giant1 David Humphreys Chief Economist Rio Tinto, London It is difficult to overstate the importance of China to the future of the world mining and metals industries. In a remarkably short time, China has risen to become the world’s largest producer and consumer of steel and its second largest consumer of non-ferrous metals such as copper and aluminium. It is currently the world’s largest buyer of copper on international markets, the second largest buyer of iron ore, and the third largest buyer of alumina. At the same time, it is the world’s largest or second largest producer and exporter of tin, lead, zinc, magnesium and a host of minor metals and industrial minerals, as well as a fast-growing exporter of coal. China’s rapid economic ascendance China’s importance to the world’s mining and metals industry may appear rather surprising given that conventional analysis, using market exchange rates for the conversion of GDP into US dollars, usually ranks China as the seventh largest economy in the world. However, this is not necessarily the best measure of a country’s economic importance from the perspective of the minerals industry. Using purchasing power parities rather than market exchange rates for the conversion of GDP into dollar terms, China is already the second largest economy in the world. And it is the world’s fourth largest exporter. World GDP League Exch rate-based PPP-based US 8879 US 8879 Japan 4055 China 4450 Germany 2104 Japan 3186 France 1453 India 2224 UK 1404 Germany 1930 Italy 1163 France 1349 China 980 UK 1322 Brazil 730 Italy 1268 Canada 614 Brazil 1149 Spain 583 Russia 1022 Source: World Bank 1999, billion US dollars China is, moreover, an economy which is growing remarkably fast. While the world economy as a whole has grown at a little over 3% a year since 1990, China over the same period has averaged growth of 9.5% a year, three times faster. Even after slowing during the latter part of the decade, it was still growing comfortably twice as fast as the world as a whole. 1 Paper to be presented to the Canadian Institute of Mining and Metallurgy’s AGM, Mineral Economics Society Session on ‘Metal Markets and Mirages’, Vancouver, 30 April 2002. 2 The nature of growth has also been important in so far as it has featured high levels of spending on investment and a rapidly growing market for consumer durables. Having emphasised growth in the coastal regions of the country in the take-off phase of industrialisation, the focus has more recently shifted inland to the western regions, the development of which is viewed as critical to China’s political and social cohesion. The Western Development Initiative has involved massive government-funded spending on infrastructure, i.e. roads, rail, pipelines, power stations and power lines, all of these heavy users of mineral raw materials. In 2001, fixed investment is estimated to have grown around 14%. Whether true or not it is hard to know but the claim that half of all the cranes operating in the world are currently in China has a certain plausibility to visitors. In addition, growth in private affluence and the beginnings of a private property market have given a boost to the market for consumer durables, such as refrigerators, TVs and motor vehicles. As the chart below illustrates, the production of motor vehicles has grown three and a half times over the past ten years to around two and a half million units. 0 0.5 1 1.5 2 2.5 3 90 91 92 93 94 95 96 97 98 99 00 01 China’s output of motor vehicles Million units Spiralling demand for mineral products This extraordinary pace of economic and industrial growth has brought with it a voracious appetite for mineral raw materials. Demand for aluminium, for example, grew at 14% a year between 1990 and 2001, and accounted for almost 60% of the entire world growth in aluminium use over this period. Demand for copper grew at a scarcely less impressive rate of 12% a year and accounted for over 40% of total world growth in copper use over this same period. In many cases, China has been able to meet this burgeoning demand from domestic sources of supply. Indeed, for some mineral-based commodities, China’s growth of production has been so fast as to outstrip its domestic consumption requirements. Thus, while China’s growth in consumption of refined zinc grew at 11% a year over 1990-2001, its production of the metal grew 13%, turning it into the 0 500 1000 1500 2000 2500 3000 3500 4000 90 91 92 93 94 95 96 97 98 99 00 01 0 2 4 6 8 10 12 14 16 18 20 China’s primary aluminium consumption 000 tonnes (line) % of world consumption (bars) 0 500 1000 1500 2000 2500 90 91 92 93 94 95 96 97 98 99 00 01 0 2 4 6 8 10 12 14 16 18 20 China’s copper consumption 000 tonnes (line) % of world consumption (bars) 3 world’s second largest exporter after Canada. Tin is another metal where China’s production has expanded rapidly, making it by some way the world’s leading producer and exporter. In both these cases, rapid growth of China’s exports has hit prices and put huge pressure on producers elsewhere in the world. However, it should be noted that production and exports of both tin and zinc slowed sharply in 2001, for reasons to be discussed later. 0 20 40 60 80 100 120 89 90 91 92 93 94 95 96 97 98 99 00 01 China’s production and exports of tin 000 tonnes Production Exports A commodity in which China has more recently emerged as a major exporter is steam coal. In this instance, export growth has not flowed from growth in production – which as the chart shows has actually been falling – but from the development of rail and port infrastructure in the coal-producing regions of the north which have given China’s inland producers greater access to world markets. As a result of this, between 1998 and 2001 China’s exports of thermal coal tripled from 30 million tonnes to 90 million tonnes. 0 300 600 900 1200 1500 90 91 92 93 94 95 96 97 98 99 00 01 0 30 60 90 120 150 China’s coal production and exports Million tonnes exports (bars)production (line) Thermal Coking China’s domestic production of primary aluminium, although it expanded rapidly through the 1990s, struggled to keep up with consumption, before a surge in production brought them close to balance in 2001. This production surge appears to have been the result of the emergence of surplus electrical power and the availability of government grants for smelter modernisation. Longer term, it is unclear whether China’s future is as a net importer or exporter of aluminium, but the poor quality of its local bauxite and the higher capital demands of alumina refinery technology make it likely that it will remain a major importer of alumina. 4 China aluminium balance 0 500 1000 1500 2000 2500 3000 3500 4000 90 91 92 93 94 95 96 97 98 99 00 01 prod/cons -200 0 200 400 600 800 1000 1200 balance Consumption Production million tonnes Balance China as buyer of mineral commodities For a range of other commodities, either because China does not have domestic resources, or else because these resources are not accessible to the major industrial centres, China looks likely to have to rely on international markets to fulfil its consumption requirements. An important example of this is copper, a metal for which China does not appear to be blessed with large economic resources and where it has emerged as a major buyer on world markets, initially of refined copper and semi-manufactures, but, latterly, increasingly of copper concentrates for smelting and refining domestically. Net imports of copper to China 0 200 400 600 800 1000 1200 1400 1600 1800 2000 90 91 92 93 94 95 96 97 98 99 00 01 000 tonnes Semis Metal & alloys Concentrates Estimated copper content, excl scrap and brass products Iron ore is another interesting case. While China evidently has large resources of iron ore, these are of relatively low quality, with an iron content of around 30% against an average of over 60% in the seaborne market. As China’s iron and steel production has grown, not only have domestic mines been unable to produce sufficient ore but they have not been able to meet the growing technical demands of iron and steel makers seeking to produce higher quality products. Accordingly, imports of have surged while domestic production has faltered. This is a trend thought likely to continue. 5 China: steel and iron ore 0 20 40 60 80 100 120 140 160 90 91 92 93 94 95 96 97 98 99 00 01 million tonnes Iron ore production Iron ore imports Steel production Note: Figures on the production of domestic ore have been adjusted to make them comparable with internationally traded ores. Future directions The importance of China’s growing role as a buyer and a seller in world mineral markets is compounded by its unpredictability. Long before it became a key factor in the world market for major metals, China’s trading behaviour confounded producers and consumers in western markets. Its sales of minor metals and industrial minerals, such as antimony, tungsten, magnesite and fluorspar amongst others, have been the subject of numerous anti-dumping suits over the years. While China’s production of these commodities was undoubtedly low cost, the state trading nature of China made meaningful cost comparisons with western producers extraordinarily difficult. At the same time, despite the existence of extensive controls for managing external trade, world prices were frequently driven down by intense competition in export markets between different producers within China. For the major metals, China would often enter the market briefly and unexpectedly – as it did for example with zinc in the mid 1980s - and then, just as unexpectedly, disappear from the market, with inevitable consequences for prices. Such erratic buying behaviour was often attributed to planning requirements, foreign exchange availability, trade opportunism or the operation of strategic stockpiles, but in truth, often nobody in the west really knew. As China has become better integrated into world markets, and the number of industrialists and traders travelling backward and forwards has increased, so some of this uncertainty has begun to diminish. The Chinese government has become increasingly aware that uncontrolled selling has damaged its own interests, suppressing world prices and encouraging the over-rapid depletion of its domestic resources, and has been trying to bring greater order to its external sales. In the absence of normal market disciplines on producers, this has often paradoxically involved the government increasing its central controls on trade, even as it has being trying to liberalise its economy. Exports of tungsten, for example, dropped sharply last year and are expected to remain down this year as the government has imposed stringent restrictions on producers and exporters to stop them destabilising world markets. As a buyer, China’s metal producers and processors have, for a variety of reasons, continued to be heavy users of spot markets, generally preferring the benefits of short term price opportunism to the security offered by long term contracts. Thus, less than 20% of China’s imports of copper concentrates and of alumina are on long term contacts. As the scale of these purchases has grown, however, this has become a less and less viable option. China’s purchases are becoming too big to be reliably met from the spot market and the dependence of Chinese industry on a steady supply of raw materials too strategically important to be left to the lottery of spot offerings. 6 Recently, evidence has begun to emerge of China looking to do longer terms deals with overseas suppliers and to participate in overseas mining investments. In iron ore, Shougang Steel’s acquisition of Hierro Peru in 1992 and the China Steel Group’s Channar joint venture with Hamersley Iron, were followed in 2001 by two twenty-year joint venture deals by Shanghai Baosteel, one with CVRD in Brazil and one with Hamersley Iron in Australia, plus a smaller five-year deal with MMTC of India. A Chinese state company has invested in the small Chambishi copper mine project in Zambia and the government has made clear its interest in participating in other overseas copper ventures. A long-term contract with Alcoa for alumina in 1997 was followed recently by a second smaller contract with BHP Billiton. Such arrangements, apart from bringing greater certainty to China’s supplies directly, also encourage the development of market supply indirectly by creating more certain conditions for western producers making mining and metallurgical investments. The second key uncertainty is how China’s domestic production develops. The structure of China’s mineral production is massively different from that which exists anywhere else. It is characterised by a very large number of small-scale low-technology operations. Mines typically enjoy implicit subsidies from provincial authorities in the sense that they are scarcely regulated. Many are operated part-time by farmers who sell their product on a spot basis to local smelters at prices well below world levels. The nature of this industry means that reliable statistics are hard to come by. However, the Chinese Government’s 10th Five-Year Plan published last year provided some numbers which illustrate the fragmented nature of its metallurgical industry. It showed, for example, that China has around fifty copper smelters, of which only four have a capacity of more than 100,000 t/y. The average smelter had a capacity of only 20,000 t/y, which compares with an average outside China of 80,000 t/y. Structure of China’s metals industry 2000 2506 iron and steel companies with 1.27employees + 515 ferroalloy plants and 661 refractory material producers 116 aluminium smelters, only 8 with capacity > 100,000 t/y Average capacity of 24,000 t/y (vs 150,000 t/y in West) 50 copper smelters, only 4 with capacity > 100,000 t/y Average capacity 20,000 t/y (vs 80,000 t/y in West) 770 lead/zinc smelters, only 11 with capacity > 50,000 t/y Average capacity 3,000 t/y (vs 90,000t/y for zinc in West) Source: 2001- 2005 Development Plan The mining industry is even more fragmented still. The figures in the table below, taken from a report commissioned by the China-Australia Chamber of Commerce and based on Chinese sources, are a little out of date but illustrate something of the scale of the problem. They show China’s mines running into literally thousands, indeed, tens of thousands. They are consistent with a paper published by the Ministry of Land and Resources (MOLAR) last year which claimed that the number of mines had reduced from a peak of 280,000 in the early 1990s to 222,254 in 1996 and to 153,063 in 2000. This last number reportedly included 37,932 coal mines, a figure much reduced from the 75,000 given for 1997, but again consistent with press reports of widespread closures of small-scale coal operations. Even so, it is quite possibly the case that even after these recent reductions China has more mines than all the other countries in the world put together. 7 Structure of China’s mining industry 1997 No of mines Workers Output Mt ore Output/ worker Coal 75761 6348143 1099.35 173.2 Iron ore 8523 561886 208.73 371.5 Copper 2003 216173 51.75 239.4 Lead/zinc 3323 185582 15.06 81.2 Nickel 15 13918 3.03 217.7 Tin 1055 84610 10.74 126.9 Source: On Kit Tam, Foreign Direct Investment in the Mining and Mineral Processing Sector of China, China-Australia Chamber of Commerce, Aug 1999 As can also be seen from the table, these mines have extremely low levels of productivity. The table above implies productivity in coal mining of 173 tonnes of coal per worker in 1997. By 1999, as a result of the closure programme, productivity had reportedly been lifted to 289 tonnes/worker, a significant improvement but still some way behind productivity of 9,900 tonnes/worker in Australia and 11,900 tonnes/worker in the US. A huge question mark hangs over how China’s mining industry will develop in the future. Much of this production would not be economic - or indeed permitted - elsewhere in the world, but with China’s geography and low labour costs it cannot readily be written off as uneconomic. The government in Beijing has – though its five-year plan - signalled its desire to see the rationalisation of industry into larger units and the closure of small inefficient operations. Pressures associated with the need to bring China’s economy into line with the provisions of the World Trade Organisation, which include the requirement to reduced protective import tariffs, also point to the need for the Chinese industry to move towards a more international scale and standard of operation. A second, and no less compelling, reason for wholesale mine closures in China is environmental. Years of poorly regulated - and in many cases wholly unregulated - mining in China have wrought environmental destruction on a monumental scale. MOLAR openly accepts that the removal of 6 billion tonnes of coal from Shanxi Province since 1949 has created a wasteland of spoil heaps and pollution. Such extensive damage has been done to water resources that the region has become subject to severe drought. It reports that in the city of Fushun in Liaoning Province 90 years of mining have created an open pit of 13 square kilometres and 300 metres deep, while the three 100 metre high spoil heaps now occupy almost 20% of the city. Official statistics show 850 mine disasters a year, including 430 mine collapses and landslides and 420 mud-rock slides. While coal has been the primary focus of these concerns and of environmentally-inspired production cutbacks, the problem is by no means confined to coal. Last year, the flooding of mines in Nandan County in Guanxi Province resulted in over 80 dead and forced the closure of a number of small tin, lead, zinc and antimony operations in the area. However, much as Beijing might want to bring about the rationalisation and clean up of the mining industry, it is not wholly in control of this process and nor is it indifferent to the political risks of unduly forcing the pace of change. Despite what remains formally a centrally-planned economy, in reality, provincial authorities have a significant degree of autonomy from the centre in these matters, an independence reinforced by distance and poor communications. They play a key role in determining the conditions under which small mines and smelters operate and they often have a different agenda to Beijing, one which tends to prioritise jobs and revenues ahead of environmental values and international trade pressures. Mine closures can be a trigger for social instability and in some instances have been met with unrest and violence. 8 Quite what the outcome of these conflicting pressures will be it is hard for the outsider – and probably the insider also - to assess. In principle, the adoption of market values and higher environmental standards should lead to continuing small mine closures and to the rationalisation of China’s production into a few medium-sized and large producers, albeit that this policy will inevitably encounter some local resistance along the way and that China may still retain a larger small-mines sector than is common elsewhere. China