When researching the evolution of the oft-used phrase The
worm has turned, in general, it is found to refer to a
reversal of fortunes. In Henry IV Part 3, Shakespeare used the
phrase The smallest worm will turn being trodden.
|Delegates from IMs CIMC 2007 conference gaze
across the vast magnesite mine at Pailou, Liaoning,
operated by Haicheng Magnesite Refractory General
Factory. Declining Chinese magnesia exports have
encouraged overseas development of new
One definition stated that Worm was a common
term for dragon. In fairy tale terms, the flying dragon spewing
fire would ravage fields and villages. To be in the
dragons path resulted in inescapable destruction. What a
relief if it changed directions.
With less drama perhaps, this is what appears to have
unfolded over the last two years with respect to China and its
influence on the global industrial minerals industry. And is
now further complicated by the prevailing economic
The turning of the Dragon
During the late 1980s-1990s, the western mineral consuming
markets were dominated by relatively low cost, and improving
quality and grades of Chinese industrial mineral exports
especially regarding fused alumina, barytes, bauxite, graphite,
magnesia, silicon carbide, and talc.
The net effect was that many western consumers modified
their requirements to accommodate the Chinese grades and a
number of well established mineral producers outside China
diversified into other markets or were forced to withdraw from
the business altogether, unable to compete with lower Chinese
Come the early 2000s, and Chinese supply began to be
affected by power, fuel, and freight shortages and rising
costs, as well as a legacy of poor mine planning and lack of
modern processing investment.
By 2005-2007, these factors already tightening Chinese
mineral supply were further compounded by central government
policies on controlling pollution (eg. closure of calcined
bauxite shaft and round kilns) and, most crucially,
discouraging mineral exports.
The latter programme was, and is, driven by Chinas aim
to conserve its own natural resources and focus their
exploitation on serving the booming domestic market. A variety
of measures including raising the export licence fee, reducing
the export volume quota, increasing the export tax, and
abolishing the export tax rebate on a range of exported
industrial minerals are continuing to erode Chinas
mineral export trade (see table of latest selected
While this evolving situation clearly troubled traders and
consumers of Chinese minerals, by late 2006 and early 2007,
those on the ball began to perceive an opportunity here for
overseas mineral suppliers and developers.
The last in-depth feature we published on China
(The changing face of China, IM December
06, p.26-39) led with the phrase Doing
business with China has just got tougher. At that time, a
trader was quoted as commenting: The overseas buyer will
either be forced to pay a significantly higher price for
Chinese minerals or buy from an alternative source, which
pretty much summed up the prevailing mood at the time.
While it was clear that no-one was able to predict the
extent of the economic downturn that started to snowball two
years later, the trends of China closing its doors to certain
industrial mineral exports, soaring mineral prices, and the
quest for mineral resources and alternative sources outside
China gathered momentum during 2007 and dominated much of
Indeed, by August of last year, the global magnesite supply
sector was positively brimming with capacity expansion plans in
order to meet current and anticipated future demand from
customers who were seeing their traditional Chinese supplies
dwindle (see Magnesite ignites, IM September
At that time, Marinko Bosnjak, managing director, Bommag Ltd
(part of refractory group Bomex Holding, Serbia, looking to
expand its magnesia portfolio) told IM:
At the end of 2009 we should be independent regarding
supply of DBM and FM [from China]. A similar strategy should be
the base for any serious producer of magnesia based refractory
In early 2007, this author presented a paper at the SME
Annual Meeting, entitled The turning of the Dragon.
Now, two years on, the Dragon has indeed turned.
So what now?
Generally speaking, the trends described above are
continuing. However, the onset of the global economic recession
has caused many, but not all, mineral prices to decline
sharply; there has been an easing of freight costs and vessel
availability; and the oil price has fallen from its $140/bbl
peak in 2008; but despite this, Chinese mineral trade during
the first quarter of 2009 has been pretty stagnant.
Some of this has been down to western buyers stockpiling
during late 2008 in advance of increases in Chinese export
taxes implemented at the start of 2009, and a general fear of
avoiding getting caught short in raw material requirements (as
happened to some during 2005-2007).
With falling market demand since Q3/Q4, eg. for refractories
for European steelmaking, those stockpiles (eg. of Chinese
refractory minerals) will now see consumers through a longer
period than originally anticipated therefore they have
little incentive to buy more at present.
The economic downturn has also raised questions over whether
it signals the end of the Chinese boom and indeed how China
might influence world economic recovery.
Clearly, Chinas economic miracle has slowed, but
Beijing is still talking of 8% growth targeted for 2009
a not inconsiderable figure. China reported growth of 9% for
2008, which represented a seven year low, and broke a five year
streak of double digit expansion. Indeed, it was not so long
ago when economists were calling for China to cool down its
economic growth rate. Just for the record, according to
Chinas National Bureau of Statistics, the countrys
industrial output grew 3.8% in the first two months this year,
with a rise of 11% in February 2009.
At the Second Session of the 11th National Peoples
Congress (NPC) in Beijing during early March, Premier Wen
Jiabao assured that China will be able to achieve the economic
growth target of about 8% in 2009. As long as we adopt
the right policies and appropriate measures and implement them
effectively, we will be able to achieve this target. said
Wen acknowledged that the country is facing
unprecedented difficulties and challenges, adding
2009 could be the most difficult year for Chinas
economic development since the beginning of the 21st
century. Incidentally, the last time China was confronted
by a similar crisis, the economy expanded by 7.8% in 1998, in
the wake of the Asian financial crisis.
November 2008 saw China unveil a huge stimulus package to
see it through the global slowdown amounting to nearly
$600,000m. over two years. As well as social welfare and
reform, the package is to focus on public housing and large
infrastructure projects all pointing to maintaining
mineral demand in domestic construction, ie. for key industrial
mineral market sectors of steel, cement, refractories, glass,
ceramics, paint, paper, and plastics.
For western players with Chinese investments in mineral
developments and mineral based end products, this should be
In his Work Report to the NPC, Wen said the country would
implement a proactive fiscal policy and a moderately
easy monetary policy. The government will increase its
spending and expect banks to issue RMB5 trillion in new loans.
The four principles of the plan may be summed up as:
1 Boost domestic demand to sustain economic growth
2 Adjust structure of the economy to raise it to a higher
level of development
3 Press ahead with reform to invigorate economy
4 Give top priority to ensuring peoples wellbeing and
promote social harmony
On industrial restructuring, the Chinese government will
implement plans for adjusting and invigorating key
industries such as the automotive sector, steel, shipbuilding,
petrochemicals, textiles, nonferrous metals, equipment
manufacturing, information technology, modern logistics, and
light industries all major users of industrial
The central government is also to allocate RMB146,100m.
($21,366m.) to the science and technology sector, up 25.6% from
last year. It is not yet known if some, or any of this funding
might be directed to improving mineral processing and
development in China, although a fair bet would be that the
rare earths sector will be a recipient in some way.
Overall, it seems that the first tranche of Chinas
stimulus package is kicking in, with the steel industry already
responding with inventory restocking. Jing Ulrich, managing
director, China Equities, at JP Morgan, Hong Kong, considers
that attitudes towards Chinas efforts to counter the
economic slump seem to have turned more positive.
During a recent UK road show on Chinas stimulus
package, Ulrich observed: While it is too early to
conclude that Chinas economic slowdown has reached a
bottom, market sentiment appears to have improved
domestically-listed A shares have seen a distinct volume
recovery and risen 32% since the start of 2009. Stocks with
exposure to Chinese household consumption should benefit from
improved sentiment as further consumption-oriented stimulus
China is under great pressure to actualise its 8% target,
and the most pessimistic forecasts indicate a 5% growth
achievement for 2009. On 18 March, the World Bank cut
Chinas GDP estimate for 2009 to 6.5%. The World Bank said
its latest view of the Chinese economy followed recent
downgrades of its projections for global GDP growth and imports
In a statement, the World Bank said: While
Chinas real economy has been hit hard by the global
crisis, it is still holding up, adding, the
estimate is significantly lower than potential growth and the
resulting spare capacity is likely to lead to weaker
market-based investment, less job growth and migration,
downward pressure on prices, redirection of exports to the
domestic market, and import substitution in the coming
Amongst the planned reforms, there could be opportunities
for mineral consumption in environmental related applications.
China will continue its drive of energy saving, emissions
reduction, ecosystems preservation, and environment protection
in 2009. said Premier Wen Jiabao.
The government is to emphasise energy conservation in the
three key areas of industry, transportation, and construction.
Wen gave out a set of measures to achieve environment
protection, ranging from energy conservation, clean energy, to
pollution prevention. We will implement energy-conserving
measures for power generators, boilers, automobiles,
air-conditioners, and lighting products. said Wen.
This could translate to increased demand for minerals used
in FGD (limestone; magnesium hydroxide), waste/water treatment
(limestone; magnesia; bentonite); autocatalysts (rare earths);
new generation light bulbs (silica; soda ash; limestone); and
new generation power sources such as batteries and fuel cells
(lithium; graphite; zirconia; borates).
Export trade outlook
The country used to rely heavily on exports for growth,
which contributed to about 40% of GDP. However, a sharp decline
in overseas demand for Chinese exports reduced economic growth
to 6.8% in Q4 2008, and by February 2009, exports had plummeted
25.7% year-on-year, the worst decline in more than a decade.
Commerce minister Chen Deming said that foreign trade faced a
grim picture in the months ahead.
At the NPC, Wen pledged measures, including fiscal and tax
policies, to ease the difficulties of exporters and
ensure steady growth in foreign trade. However,
tellingly, Zhuang Jian, senior economist with the Asian
Development Bank was reported as stating: We should look
to domestic consumption, although that will take
In a bid to boost exports, on 10 March 2009 the Chinese
government announced plans, so far with little supporting
detail, to reduce export taxes to zero. The commerce minister,
Chen Deming, said China would according to international
rules, steadily restore zero tax rates for export
As well as the gradual reduction of export tax to zero, Chen
also said the government would follow international trade rules
and restrict industries that are high polluting and wasteful of
natural resources the latter may well affect certain
mining and calcining operations.
It is anticipated that these zero export tax
plans will certainly encompass finished products
(this could include refractory and ceramic products exported),
but whether they will also include raw materials or processed
minerals remains to be seen.
Chinese export taxes are imposed for a range of industrial
minerals including bauxite, mullite, alumina, kaolin,
silicon carbide, fluorspar, talc and graphite with some
tax increases initiated on 1 January 2009 (see IM December
08, p. 10). Export VAT rebates for these minerals
have also been abolished.
Certainly, most traders and consumers would welcome such a
move, which would further soften Chinese mineral export prices,
which have been falling since the years beginning.
Meanwhile, US trade officials are compiling a case against
China to the World Trade Organisation, challenging Chinas
export restrictions, such as taxes and export quotas, on raw
materials used in US industries, such as steel, and including
magnesite and fluorspar (see IM October 08,
The charge is that such practices distort world trade and
provide downstream Chinese manufacturers (ie. domestic users of
these minerals) with an unfair advantage of selling their
products at a lower price in domestic and overseas markets.
This should provide an intriguing backdrop for the upcoming G20
At a press conference on the sidelines of the annual session
of the NPC in March, Chen Deming raised the subject of trade
protectionism, stating: China firmly opposes trade
protectionism and would not turn to trade
Deming went on to say: All nations attending the G20
Washington Summit [November 2008] stated against trade
protectionism. But in practice, protectionism is still
gradually gaining ground. Chen noted that a distinction
must be made between trade protection measures permitted within
the WTO framework, and outright trade protectionism.
Interestingly, Chen said: A country is allowed to use
some trade protection measures during a financial crisis, when
its industrial and agricultural products are
|Selected Chinese export quotas
|Selected Chinese export taxes, VAT, and export
||Export licence (RMB)
||export tax (%)
||export tax (%)
|Brown Fused Alumina
|Dead Burnt Magnesite
Included in the Work Report delivered to the NPC, was
reinforcement of Chinas go global strategy,
ie. supporting Chinese enterprises in investing overseas and
undertaking international mergers and acquisitions.
Recent obvious examples of this include Bosai Minerals
Groups acquisition of Omai Bauxite Mining Inc., Guyana,
for $46m. in early 2007. A somewhat strategic buy, since OBMI
(now Bosai Minerals Group (Guyana) Inc.) is the sole producer
of refractory grade bauxite outside China.
Much is still being made of Chinalcos increased stake
in the beleaguered Rio Tinto Plc, including a $12,300m.
investment in Rio Tintos metal projects.
In another strategic buy, on 16 March 2009, Chinas
East China Exploration Co. (ECE) announced that it will invest
A$24m. (US$15.9m.) to acquire a 25% interest in Arafura
Resources Ltd, a Perth-based speciality metals explorer, with
projects in rare earths (RE) and phosphate.
If further evidence were needed, on 4 March 2009,
Chinas $200,000m. sovereign wealth fund, China Investment
Corp. (CIC) announced its intention to diversify its portfolio
into the natural resources sector (after booking heavy losses
on high-profile financial investments in private equity firm
Blackstone and US bank Morgan Stanley). CIC sees investment
opportunities in energy and commodities sectors as prices have
It is also no secret that Chinas State Reserves Bureau
has also bought up metals to increase stocks of strategically
important raw materials such as copper, and to lend support to
struggling smelters of aluminium and zinc.
The market can expect to see more Chinese activity in
securing mineral resources and strategic mergers and
acquisitions worldwide. Mineral targets are most likely to be
those in short supply, with limited producers, or deemed
strategic. These could include lithium, rare earths, talc,
bauxite, aluminosilicate minerals, borates, graphite,
fluorspar, oilfield materials (barytes, frac sand), and
Until Chinas stimulus package really takes hold,
domestic mineral production and export trade is taking a
considerable hit, although China and East Asia might be
considered slightly better off than the West. The Asia market
for minerals is about 30% off, compared to about 50-60% off in
western countries, estimated one industry source.
While it is clear that Chinese mineral producers are pinning
their hopes on a quicker and more substantial recovery in the
domestic markets rather than overseas export markets, there are
still signs that this has yet to take off.
For example, according to Metal Bulletin, in
mid-March chromite inventories at Chinese main ports had
reached an incredible 1.5m. tonnes three times that of
last year. Stocks of imported chromite have been climbing since
Q3 2008 owing to falling demand for ferrochrome from Chinese
stainless steel producers. Some 1m. tonnes of chromite is
enough to produce 450,000 tonnes of ferrochrome.
There was an upturn in demand just after the Chinese New
Year when steel mills were producing at 90% capacity, that has
since fallen to 20% as steel demand has dropped and thus has
demand for raw materials.
Many Chinese mines are reported to be reducing production
rates or ceasing operations altogether. Export of wollastonite
from Jilin province, north-east China, for example, was
reported as nearly stopped, partly owing to the
lack of demand from its main European importer.
Japan, a primary consumer of a range of Chinese industrial
minerals, has also cooled its demand on raw material
requirements. Junguo Fan, Sales Dept., of mica producer and
mineral processor Hebei Chida Manufacture & Trade Co. Ltd
told IM: The demand of the Japanese
market in the first quarter of 2009 is only nearly 20-30% of
the same period in 2008. The mineral market will be very hard
Hebei Chidas response to conditions re-emphasises the
industrys focus on Chinas domestic market future.
Our company is trying its best to find new customers
beyond our current clients. We are trying to develop domestic
customers because the domestic market seems much better than
the overseas market. said Fan.
Likewise, Cindy Wu, general manager, Sino Industrial
Minerals Trading Co. Ltd (SIM), concurred: As the Chinese
domestic market is booming, so the domestic demand for the
minerals is also increasing very fast..
Wang Ying, import & export manager, of magnesia and
refractories producer Fengchi Refractories Co. of Haicheng
City, told IM: The export market is not
good now. The price of the mineral reduces again and again.
Demand is very low, all the overseas customers are waiting and
do not buy. Many small manufacturers are closed because of the
crisis. But in the domestic market demand is not bad. I think
in the second half of 2009, the economy will be
Since the Beijing Olympic Games in August 2008, the Chinese
talc market has contracted. The government added a 10% export
tax on talc on 1 December 2008, and a 10% export tax on
chlorite on 1 January 2009. In view of the economic recession,
the Chinese talc industry was somewhat puzzled by
the government decision.
Jia Xiu Zhuang, manager, Haichen MinChem Co. Ltd, said:
The talc resource tax has increased greatly in 2009. This
cost increase makes small mines impossible to survive. Chinese
producers are struggling to absorb the mining cost increase and
the 10% export tax.
The Chinese talc market is described as quiet.
Chinese talc relies mainly on Japan for micronised talc
imports, and the USA as the major importer for high quality
lumps. However, there have been few new enquiries or even firm
orders during the first quarter of 2009. Some outstanding
orders have been delayed since most mines have not been able to
maintain full operation.
Zhuang told IM: It is very uncertain for the market
for Q2 and afterwards. Both suppliers and buyers are watching
and waiting. Chinese producers hope the market will be better
in Q3 and Q4.
Wu of Sino Industrial Minerals Trading Co. Ltd admitted that
compared to a prosperous 2008, this years
mineral market was relatively inactive. By the end of
March, there will not be much shipping and selling. The market
could not be too well for this year. It is difficult for any
new developments on mineral markets this year. Having a look
around, it seems as if everybody is silent. So, be patient and
wait till the new development comes.
Or rather lowlights the trend is
definitely one of declining Chinese mineral prices compared to
the sharp increases experienced during 2008. However, that
said, there have been some mixed reactions, and perhaps the
drop in prices has not been as sharp as expected. For example,
Chinese FOB talc prices are apparently at the same levels as
last year (see accompanying panel for recent prices
One reason is that the January 2009 export tax increases
have probably offset some of the decline in prices triggered by
the recession. Certainly, while inventory mineral stocks of
western consumers remain high, and demand for their products
down, prices will soften and trade will be slack. Mid-year
might well see a turnaround in this situation.
Junguo Fan, Sales Dept., of Hebei Chida told
IM: Mineral prices are lower than
before, but not by too much. The main reason is that mineral
products are not encouraged by our Government. The VAT for
mineral products was increased from 13% to 17% since Jan. 1st
2009. Almost all mineral products dont have a tax rebate.
However, many other non-mineral products are enjoying more tax
rebate that before.
Export prices didnt come down, not as the people
have expected. They have maintained the same high prices as
last year. said Cindy Wu, of SIM.
What is very clear is that freight rates have decreased
considerably, and that has assisted some exporters,
particularly those supplying long distance customers.
Before end of August 2008, the freight rate was extremely
high, but months later, the freight has dropped sharply. It
seems that suddenly a lot of empty containers are always
waiting at the ports. commented Wu.
The accompanying table illustrates the reduction in prices
of container rates during 2008. The present rate for a full
container load appears to have dropped further, one example
quoted from China Port to Europe Main Port at U$350/20ft
|Container freight rates Jan-Dec 2008
|From Tianjin, China to
|Los Angeles, Long Beach
|From Tianjin (China) to
Magnesite quota questions
As reported last year, a number of Chinese magnesia
producers are investing in new kilns and resources to better
serve the domestic market, while overseas producers have
announced a raft of ambitious capacity expansion plans to take
up the slack from declining Chinese exports (see IM
September 08, p.28-45).
Although, the economic downturn must surely have placed a
temporary hold on some of these capacity expansions, two new
sources of magnesia supply have emerged in recent months:
Magnezit to export magnesia from Russia (see IM January
09, p.6), and Quintermina to supply grades from
North Korea (see IM February09, p.8).
Industry sources in China describe production as being
now very small and market demand
sluggish. Dead burned magnesia (DBM) production is
at least 50% down owing to a slow market. Caustic calcined
magnesia (CCM) production is reported as steady, although the
market may be about 30% down with demand, unlike DBM,
not constrained to mainly the steel industry.
Fused magnesia (FM) production has been described as at
least 60% down, demand for FM97 grade in MgO-C refractory
bricks is also 60% down.
FM producers are under pressure from electricity providers
requiring immediate payment on average some
3,000kwh/tonne of FM is required.
One of the key issues facing the Chinese magnesite industry
is its use, or rather, non-use of the export licence quota
volume, and how this might affect the rest of trade in
The export quota for the first half of 2009 export license
is 700,000 tonnes. Then there remains some 80,000 tonnes of the
2008 export quota still to be used up.
The leading Chinese magnesia producers, which hold the
majority of export licenses and associated quotas, are lobbying
the government to cancel the issuing of the export license for
the second half of 2009 which is scheduled at 700,000
In late 2008, IM was made aware of
this situation, and was informed that should 90% of the H1 2009
quota (ie. 630,000 tonnes) not be fulfilled by mid-2009, then
the H2 2009 magnesia export quota would indeed be
With market demand down by an average of at least 50%,
coupled with availability of the 80,000 tonnes from the H2 2008
export quota, it seems likely that a total of 780,000 tonnes
would be ample for H1 2009 market demand.
The problem is that western buyers purchased huge stocks of
Chinese magnesia last year which are expected to see them
through to mid-2009, and perhaps longer if refractories demand
continues to slow in the West.
The key point is, if say, over 50% of the H1 2009 quota is
sold, but shy of 90%, will that trigger cancellation of an H2
export quota and leave very little material left for buyers to
fight over for the rest of the year? Bear in mind that Asian
magnesia consumers also will be competing for this
No doubt this is where new sources such as in Russia and
North Korea may come into their own.
Barytes heavy grades available
|Talc in the hand...is worth more in the domestic
market?: hand sorting talc at Liaoning Aihai Talc Co. Ltd
plant in Mafeng. Chinese producers are struggling to
absorb the mining cost increase and the 10% export
There is continued debate over whether there is a shortage
of drilling grade barytes, with China traditionally having been
a major supplier to the global market.
Added to the melting pot is the imminent move by the
American Petroleum Institute (API) to approve a modification of
its API barytes drilling grade specification to 4.1 g/cm3 SG
(as opposed to a minimum of 4.2SG see News
p.6). This would open up the potential of using 4.1SG
barytes deposits in Nevada, USA to supply the Gulf of Mexico
market, and lessen reliance on Chinese imports. According to US
Geological Survey data, in 2007, the USA imported 2.2m. tonnes
of barytes from China, representing 92% of total US consumption
in that year.
Although factors such as increased barytes consumption
within China and export discouragement through export taxes and
export VAT rebate abolition point towards a challenge to
continued supply from China, there is support that China can
yet maintain its position as a supplier of 4.2SG grades.
In his presentation at the SME Industrial Minerals Division
luncheon on 24 February, consultant Ian Wilson maintained that
there was no shortage of potential sources of 4.2SG barytes in
China. Indeed, Wilson explained that over 50% of 334 recent
samples from deposits yielded an SG of 4.3-4.4.
Rocky Mountains Industry Development Co. recently brought on
stream a 4.2SG barytes source near Sanjiang, Guangxi province
(see New Chinese barytes source, IM August
08, p.75). The ore is taken to the companys
processing plant at the port city of Zhanjiang for processing
to finer grades. One trend that is understood to be gaining
ground is that more Chinese barytes is being processed locally,
and that this may result in a decrease in lump barytes
John Allen of UK based barytes trader Anglo Pacific Minerals
said: There is no shortage [of >4.2SG barytes] and
[owing to the present conditions] everybody is highly stocked.
We purchased a lot of >4.2SG barytes before Chinas
export tax came in November 2008 .
Bauxite supply tight, but demand
Sources in China have informed IM that
owing to the government crackdown on illegal mining operations,
raw bauxite mining for refractory grade has almost ceased.
Apparently, in China only alumina plants now have the mining
rights to bauxite reserves. What is more, bauxite is
enlisted in the governments protocol of restricted
mining policy. said the industry source.
This situation has translated into a shortage in supply of
calcined bauxite, and crucially, an apparent drop in quality.
However, its shortness in supply means that prices have not
dropped, and indeed remain relatively high.
But the irony is that overseas demand for refractory bauxite
is very much down anyway, by as much as 70% according to one
trader. The first two months of 2009 witnessed a mere 10,000
It is understood significant stocks of bauxite amounting to
some 100,000 tonnes remain in bonded warehouses in Tianjin,
China. Elsewhere, stocks also remain high outside China, and
end users are now waiting for stocks to draw down before
ordering more material.
The export quota volume for bauxite for H1 2009 stands at
470,000 tonnes. It remains to be seen if this gets fulfilled,
and to do so, prices would probably have to come down.
Fluorspar exports declining
The situation for Chinese fluorspar is similar to that of
magnesite reduced exports, domestic demand priority. As
a percentage of world fluorspar production, during the 1990s,
Chinas exports hovered around the 30% mark, exerting
considerable influence on world trade, effectively pushing
Since 2000, like magnesite, Chinas fluorspar exports
have declined significantly, to about 9% of world production in
2008. After reaching its peak in 2001 of 1.5m. tonnes,
Chinas fluorspar export quota has dropped to 550,000
tonnes in 2009. During this same period, Chinas fluorspar
consuming markets of aluminium, steel, and hydrofluoric acid
have grown significantly the latter tripling in size
Outside China, western fluorspar producers had exited the
market under pressure from low cost Chinese exports, and few
companies invested in fluorspar resources and capacities. Thus
there is now a dearth of high quality acidspar supply outside
China and consumers worldwide are facing shortages.
There is a handful of projects at various stages of
exploration and development worldwide, but significant new
fluorspar supplies are not expected to come on stream until
2010 or later (see IM February 09, p.38-45 for a
review), and with the downturn in full swing, some of
these project may now face delays.
|Estimates of Chinese and rest of world fluorspar
consumption 1984-2008: Although ROW consumption has
fallen, Chinese fluorspar is increasingly supplying its
growing domestic market at the expense of exports, and
there is now a shortage of quality acidspar grades.
|Source: Michael Miller, USGS (2009)
Paper minerals good prospects
One market that has been experiencing rapid growth in China
is the paper minerals market. Key minerals consumed are
precipitated calcium carbonate (PCC) and ground calcium
carbonate (GCC) for main fillers, and kaolin for coating.
According to Ian Wilson (2009), the Chinese market for GCC
grew to 12m. tonnes in 2007, from 375,000 tonnes in 1992, with
paper the largest consumer at 33% after plastics (34%). Leading
players active in wet GCC processing plants for paper companies
include: Imerys at Nanling, Anhui, and UPM-Kymmene, Changshu,
Jiangsu; Omya at Changshu, Jiangsu, and Chenming, Jiangxi;
Hosokawa Alpine at Sun Paper, Shandong; GAW Technologies GmbH
at APP, Dagang, Jiangsu, Nine Dragons, Guangdong, and a new APP
project at Ningbo, Zhejiang Province; Callisto International at
Chenming Paper, Shouguang, Shandong; Hua Xia Co. at Gold
Huashen (APP), Suzhou.
Paper and board production in China has accelerated markedly
since the early 1990s, especially compared against other paper
world leaders Japan and the USA, and is estimated to push
through 80m. tonnes in 2009 (see chart). Of the 11.6m.
tonne increase in world paper and board production in 2007, an
amazing 74% was accounted for by China, which saw its market
grow by 13% (2005-06 growth was 16%).
For the first time, during Q4 2008 China produced more
coated woodfree paper (CWP) than South Korea. CWF paper uses
bleached chemical pulp, little or no mechanical pulp, and can
be single, double, or triple coated the surface is
typically matt or gloss-calendered. China is expected to become
Asias largest CWF producer and exporter.
|USA, China and Japan paper & board production
1993 to 2009e (m. tonnes), showing the sharp increase in
paper output by China since 2000 - a fertile market for
GCC, PCC, and kaolin.
|Source: Ian Wilson, consultant (2009)
One of Chinas crown jewels is its rare
earths (RE) deposits on which it has built a huge and growing
production base. China is responsible for some 95% of world RE
production. At Baotou, Inner Mongolia, the ever expanding
REE Development Zone staffs 200 scientists, 2,000
technicians, and 20,000 workers (Cox, 2009).
There are three distinct production zones: Bayan Obo, Inner
Mongolia, bastnaesite, low-cost by-product of iron mining,
light REE; Sichuan province, bastnaesite, primary source light
REE; and south China, adsorption clays, primary source of heavy
REE. What is catching the headlines is Chinas growing RE
market and its policy of securing RE resources home and
Also noteworthy, is news that Chinas RE production
centre at Bayan Obo is starting a stockpile of RE raw material
speculation as to its size ranges from 30-300,000
tonnes. Cox (2009) also noted that increased recovery of REO
was expected at Bayan Obo, and that the Baotou tailings dam has
200 years worth of world supply.
World demand is about 124,000 tpa rare earth oxide (REO)
valued at $1,250m., and is forecast to reach 200,000 tonnes in
2015, valued at $2-3,000m. Chinese RE consumption has been
accelerating at 28% annually since 2002. Dudley Kingsnorth
(2009) has warned that the RE balance between supply and demand
could be an issue in 2014.
Leading end uses for RE include metal alloys (15-20% growth
estimated 2011-2014), magnets (10-15%), phosphors and pigments
(7-10%), ceramics (7-9%), polishing (6-8%), and catalysts
To meet this increased demand, some 205-210,000 tonnes of
REO will be required to be produced. China would be expected to
produce 165,000 tonnes, with 115-120,000 tonnes for domestic
consumption (expected to increase as it expands its RE product
manufacturing base), and a mere 25,000 tonnes for export.
China, as with certain other industrial minerals, has also
constrained world RE availability by withdrawing its VAT export
rebate, adding an export tax, and reducing the 2009 H1 export
quota by 15% to 15,043 tonnes, down from 2008s 22,780
Therefore, new RE projects outside China, will be required
to come on stream to meet the short fall of capacity outside
China (see chart). There are several projects in the
pipeline (see Rare earths at the crossroads, IM
September08, p.70), but they are facing the
hardships of the recession (Lynas recently suspended its Mt
Weld project see IM March 09, p.8), and
will also need to compete with Chinas policy of seeking
RE sources outside China.
Chinese companies are on a quest to secure new RE resources,
as evidenced by East China Exploration Co.s recent move
to acquire a 25% stake in Arafura Resources Ltd which is
developing the Nolans Bore RE deposit in Australia (see
News p.10). It was also reported recently that newly formed
China Minmetals Rare Earth Co. plans to invest $44-58m. to
position itself globally in the RE sector. This will include
restructuring of mining and processing companies in Ganzhou,
Kingsnorth is confident that China will not
starve the world of RE resources, although that
remains to be seen, and that with the first of the new and
potential RE operations on stream, the increased demand for RE
should be met.
|Chinese and world RE supply & demand 2004-2013f:
this assumes current trends continue, new projects are
developed, and there is a balance in supply
and demand for individual rare earths. Crucial, will be
the opening of new sources outside China to meet
|Source: Dudley Kingsnorth (2009)
Although the market can only wait and see how Chinas
economy responds to its stimulus package, and it appears that
this is leaning towards a positive outcome which might emerge
during H2 or late 2009, there are certain factors which are
China is no longer a source of readily available, low cost
mineral exports. In fact, mineral exports should be expected to
decline further as the policies of raw material export
discouragement continue combined with growth in demand from
Chinas domestic markets.
The priority for mineral producers in China is its rapidly
developing and expanding domestic market. Traders and consumers
which have historically relied on Chinese minerals must seek
The situation throws up two strands of opportunities: within
China, to join others already active in investment and
development of high grade raw material resources to serve the
domestic (and other East Asian) markets; and outside China,
investment and development of new and established mineral
sources to meet the shortfall in mineral supply from China.
The extra challenge now apparent regarding the latter
opportunity, is to compete with Chinese players in securing
global resources of strategic industrial minerals.
Cox, C. (2009), The Anchor House, Competing with China
in rare earth exploration & production, paper
presented at 2009 SME Annual Meeting & Exhibit, Denver,
22-25 February 2009.
Kingsnorth, D. (2009), Industrial Minerals Co. of Australia,
The rare earths market: can we supply
demand in 2014?, paper presented at PDAC 2009
International Convention, Toronto, 1-4 March 2009.
Miller, M. (2009), US Geological Survey, Effects of
Chinas export policies on world fluorspar suppliers and
prices, paper presented at 2009 SME Annual Meeting &
Exhibit, Denver, 22-25 February 2009.
Wilson, I. (2009), Consultant, China, paper
presented at SME Industrial Minerals Division Luncheon, 2009
SME Annual Meeting & Exhibit, Denver, 22-25 February
CALL FOR PAPERS: 8th Chinese Industrial Minerals
Conference -CIMC8, 7-9 September 2009, Qingdao, China;
contact: Victoria Smith, email@example.com