The Chinese government has continued to launch a series of
environmental inspections on heavy industries in the country in
order to strengthen its control over industrial pollution
levels and environmental quality.
Industrial activities are influenced by the inspections, and
a number of enterprises which have not reached the required
standard will be strictly supervised or shut down.
Most prices for industrial minerals have in the recent past
shown an upward trend, because the lack of sufficient supply
caused by the inspections created a bullish effect in the spot
Earlier this year, China’s Ministry of Ecology
and Environment announced that the country will continue to
carry out its first round of strict environmental inspections,
and will complete a second round of inspections within three
years under the supervision of the central government.
In mid-March, the minister for environment, Li Ganjie, said
that, while specific steps have yet to be outlined, the
three-year plan will broadly focus on "controlling pollution in
key areas and from heavy industries."
Three inspection teams from the ministry have been deployed
for the first round of environmental inspections, according to
meetings held by bureaux of supervision in northern, southwest
and northeast China on April 23-24. The inspection groups will
stay in the inspected units for around one month.
Governments in each province of China have also made more
effort to control environmental pollution, and to accelerate
industrial restructuring and upgrading, in order to reduce
ecological environment pressure.
Since April, Liaoning province has restricted magnesite
mining for environmental inspections, Hebei province brown in
stricter regulation for local companies, Shanxi province has
started a new round of environment inspection in Lvliang and
Jinzhong, and Sichuan province has started inspections
regarding health and safety in sectors including steel, coal
and electrolytic aluminium.
Shandong province is expected in May start a new
environmental inspections in four cities – Zibo,
Dongying, Taian, and Linyi.
Since last year, production limits and shutdowns have
resulted in significant changes to some industries.
The wide-reaching government action related to the
implementation and tightening of the environmental policy had
serious consequences for a number of mineral supply chains in
the country, including bauxite and alumina, graphite and
magnesia, and titanium dioxide.
What follows is a breakdown of how these mineral commodities
have been affected to date.
Bauxite mining in Shanxi, China’s principal
producing province of the refractory-grade mineral, has been
targeted by government authorities on and off since 2016. The
first wave of clampdowns, which very much resembles the
situation today, had the double aim of reducing widespread
illegal mining of the mineral, as well as improving the
sustainability profile of bauxite mining and processing,
reducing pollution affecting the local air and water.
From mid-November 2017 to mid-March 2018, a temporary
shutdown was put in place in Shanxi and Henan, the latter being
the main province for production of fused alumina. During the
four-month period, industrial production of bauxite and alumina
was severely reduced, a pattern that kept stocks low and upheld
Then, at the end of March, fresh regulations from the
national government set out a three-month plan for proper
management of local land and resources, tackling unlicensed
exploration and illegal exploitation and mining of bauxite.
Shortly after, in the week of April 16, bauxite calcination
plants in Shanxi were ordered to halt all operations once
again, pending new inspections. Sources said that this closure
may last as long as two months, until the end of June.
For its part, the alumina industry was hoping that the
market would stabilize with a gradual return to normal
production flows. This was not the case, however, because in
mid-March, the Ministry of Industry & Information
Technology (MIIT) sent a working group to Xinxiang and Anyang,
in Henan province, for a supervision meeting on peak production
Exacerbated by bad weather conditions, air quality pollution
levels have been consistently exceeding acceptable thresholds
throughout the winter, despite the temporary shutdowns.
"This is the situation after months of almost no
production," one market participant, who had visited the
province, told Industrial Minerals. "If I’m any
judge, this won’t deter the authorities. They will
continue to impose shutdowns."
The market for magnesite and processed magnesia products
experienced a severe squeeze in Chinese output last year, which
led prices to spiral upward in the second half of 2017 and to
remain firm into 2018.
Mining restrictions remained in place into this year, with
dynamite blasting banned and miners allowed only to extract via
pneumatic drilling or by hand. This had already affected the
availability of magnesite ore for the production of high-grade
magnesia, leading to a shortage of high-grade dead-burned
magnesia (DBM) and fused magnesia (FM), which is
In mid-April, a sudden government order brought to a halt
all magnesite mining in Liaoning – the largest
producing area for magnesia. Several producers in contact with
Industrial Minerals confirmed that they had stopped mining, and
did not know how long the stoppage would last.
"All magnesia companies have been forced to stop magnesite
mining from April 12, following government requirements," a
local producer said.
Market prices have so far been unchanged in the weeks since
the mine closure, but market participants remain on alert,
after witnessing the sharp increase in prices last year.
In line with the restrictions imposed on other mineral
supply chains, graphite was also widely affected by the
environmental policy-related series of inspections and closures
last year, especially in Shandong, the main producing province
of the mineral.
This led to a rapid appreciation on the spot market for
flake graphite in the second half of 2017, following a number
of years of weak pricing. The high price levels have since
stabilized in early 2018 and have mostly held steady to
Local producers are, however, concerned about a fresh round
of production cuts in anticipation of a government summit to be
held in Qingdao in June. As seen on several previous occasions,
authorities impose a temporary stop to heavy industrial
operations in the weeks running up to an event, to improve
local pollution levels. Sources expect that they will do the
same in this instance.
Production of titanium dioxide in China slowed over the
winter months. The increased use of energy for house heating
increased air pollution, particularly in the TiO2 producing hub
of Panzihua, in Sichuan.
Many producers are reported to have used the period to idle
capacity and conduct repairs, with other sites periodically
closed down by snap inspections triggered every time the air
quality dropped below an acceptable level.
Market participants report that production has seen a strong
rebound across China, with temperatures rising, and
environmental restrictions have been lifted.
But western consumers expect continued restrictions on
Chinese supply, given the lon- term focus on preserving air
"They’ve been pretty clear about what they want
to do. They aren’t going to change course now,"
one buyer told Industrial Minerals. "The increase was seasonal,
as we expected, but it doesn’t change the