Thursday, March 22, 2012

China no threat to foreign commodities - analyst

PERTH  Data analysts Raw Materials Group on Wednesday defended Chinese investment in foreign resources projects, stating that the Asian major’s effect on the resources industry was less than popularised.

Speaking at the second day of the Global Iron Ore and Steel Conference, in Perth, Raw Materials Group chairperson Magnus Ericsson said that Chinese investment accounted for only 1% of all the minerals produced around the world.

“Australia and Canada account for much higher ownership in foreign projects, but no one is claiming that they are taking over the supply of commodities,” Ericsson said.

Looking at iron-ore supply specifically, China currently had ownership of only some 30-million tons globally, of which 20-million tons came out of Australia, seven-million tons from Peru, 1.7-million tons from Brazil and a further 800 000 t from Canada.

When developing projects were taken into account, China’s share of world iron-ore production rose to 110-million tons.

However, Ericsson noted that when compared with the country’s target of owning 50% if its imports by 2015, which translated to between 300-million and 400-million tons a year, China was still lagging behind.

“They will not reach that goal, its completely impossible.”

Ericsson noted that China’s foreign expansion was slow for several reasons, including the country’s inexperience with large scale openpit mining.

“Chinese mines are often small and deep, so there is no Chinese model to bring to whatever country is of interest. There is also the problem of cultural problems and the suspicion with which a lot of African countries are viewing Chinese interest.”

Ericsson predicted that Chinese interest in global exploration would increase in the future, creating interesting opportunities for countries which did not perceive China as a threat.

Meanwhile, Ericsson noted that China was spending some $4-billion on in-country exploration, however, he noted that exploration success, especially in the iron-ore sector, was limited.

He estimated that there were currently between 5 000 and 10 000 iron-ore mines in China, with most of the operations being small, artisanal type projects.

Considering the low iron content of the ore, as well as the small volumes produced by the mines, iron-ore operations in China were also considerably more expensive than their western counterparts.

“With lower grades and deeper underground operations, as well as more emphasis on health and safety and environmental concerns, I’m convinced that production costs in China will increase,” he added.

Edited by: Creamer Media Reporter