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Rigid Demand for China’s Mineral Resources Will Keep Growing for next 15 to 20 Years

“At present, the mining industry in China is in a recession and adjustment period. The key to recovery is the extent of the recession and the duration of the adjustment period. The only way out is to deepen reform, accelerate structural adjustment, make a new round of technology innovation and improve labor productivity,” commented Wang Jiahua, Vice President of the China Mining Association, in the China Mining Industry Newspaper. He also stated that the current situation in the mining industry must be analyzed and judged with a macro view and from the perspective of economic globalization.

With further regard to the situation of the mining industry in China, Wang Jiahua says that the contribution of the mining industry to the macro economy is not stagnant, and the demand for mineral products is still rising although with a decelerating speed. Government statistics for the first half-year of 2014 show that the output of ten types of non-ferrous metals, iron ore and oil-gas increased by 6.7%, 7% and 1%, respectively, while coal remained the same as compared to the corresponding period of last year. The import of iron ore and ten types of non-ferrous metals, especially copper, represented a rise of 19% and 34%, respectively, as compared to the corresponding period in 2013.

In addition, hardships of structural adjustment have appeared in the mining industry: certain kinds of ores like coal have suffered from overcapacity; ongoing environmental pressures; exploration investment and drilling workload have decreased by 13.7% and 21.7%, respectively; mineral assets have suffered a severe loss, with the share value of primary exploration companies listed on the growth enterprises market of Toronto equity has reduced by about 70% ~ 80%; financing programs have experienced a bottleneck, with mining companies struggling to survive; and constant price reductions for mineral products have seen 14 mining-related domestic producers listed in the Fortune 500 suffering losses.

In Wang Jiahua’s view, the time for deepening tough reforms of the mining industry in China has begun and the anti-driving mechanism has formed. A consensus has been formed in China’s mining industry on the road to green development, science going global and China’s risk exploration capital market. Positioning the mining industry as the first industry has been recognized and become a consensus in academia. Premier Li Keqiang has also approved the report of the China Mining Association.

“China contributes the most to the global mining economy and is helping keep it prosperous in the recession. The price of iron ore could not be maintained at USD90/ton without China’s efforts,” says Wang Jiahua, emphasizing that China has no responsibility for the price fall of mineral products this year. “China’s GDP growth rate has decreased from double digits to 7.5%, but the absolute number is still increasing, and such a decrease in rate will not exert significant influence on the world market. The weak development of emerging economies and slow recovery of developed economies have led to output growth which could not be fully consumed by a decline in demand globally in a short period, which caused the current price diving of non-ferrous metals.”

How long will the decrease last? Will the 10-year golden period in the mining industry reappear? Wang Jiahua gives his view that the duration of the decrease depends on the “fundamental factors” of China’s mining industry and the development situation of other emerging economies. “In terms of the macro economy, the rigid demand for mineral products in China will keep rising in the coming 15 to 20 years. If India can maintain 6% GDP growth, it will reach a historic junction with a rapid increase in demand for mineral resources 15 years later. India can then take over the relay baton from China. By then, the price of mineral products will have stabilized; otherwise, there is little hope for a price rise for mineral products.”

Source: China Mining Industry Newspaper

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