The Chinese government has continued to launch environmental
inspections of heavy industries in the country in order to
strengthen its control over industrial pollution levels and the
quality of the environment.
Industrial activities have been influenced by the
inspections, and a number of enterprises which have not reached
the required standard will be strictly supervised or shut
Most industrial minerals prices have in the recent past
shown an upward trend, because the diminished supply caused by
the inspections has created a bullish effect in the spot
Earlier this year, China’s Ministry of Ecology
& 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, environment minister 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.
Regional governments in each province of China have also
made more effort to control pollution, and to accelerate
industrial restructuring and upgrading, in order to reduce the
pressure on the country’s ecology.
Since April, Liaoning province has restricted magnesite
mining pending environmental inspections, Hebei province has
brought in stricter regulation for local companies, Shanxi
province has started a new round of environment inspections 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 to start new environmental
inspections in four cities in May – Zibo, Dongying,
Taian and Linyi.
Production limits and shutdowns have resulted in significant
changes to some industries since last year.
And the wide-reaching government action related to the
implementation and tightening of the environmental policy has
had serious consequences for a number of mineral supply chains
in the country, including bauxite and alumina, graphite and
magnesia, and titanium dioxide (TiO2).
What follows is a breakdown of how these mineral commodities
have been affected to date.
Chinese brown fused alumina, refractory
price ($ per tonne, fob China)
|Source: Industrial Minerals
Chinese refractory grade bauxite 85% price ($
per tonne, fob China)
|Source: Industrial Minerals
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 twin aims of reducing widespread
illegal mining of the mineral, as well as improving the
sustainability of bauxite mining and processing by reducing
pollution of the local air and water.
From mid-November 2017 to mid-March 2018, a temporary
shutdown was enacted 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 prices
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, levels of air
pollution have consistently exceeded acceptable thresholds
throughout the winter, despite the temporary shutdowns.
"This is the situation after months of almost no
production," one market participant, who visited the province,
told Industrial Minerals. "If I’m any judge, this
won’t deter the authorities. They will continue to
Flake graphite, 94-97%, +80 mesh, price ($ per tonne,
Chinese dead burned magnesia, 97.5%, lump,
($ per tonne, fob China)
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 to extract material
only 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 a halt to
all magnesite mining in Liaoning, the country’s
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
"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
for the mineral.
This led to a rapid appreciation in the spot market prices
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 to conduct repairs, with other sites periodically
closed down by snap inspections triggered every time the air
quality drops below an acceptable level.
Market participants report that production has seen a strong
rebound across China, with temperatures rising as the weather
improves, and environmental restrictions have been lifted.
But western consumers expect restrictions on Chinese supply
to continue, given the long-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